5. BP p.l.c. (NYSE:BP)
Number of Hedge Fund Holders: 27
BP p.l.c. (NYSE:BP) is a UK-based energy giant with a rich history of over 110 years.
BP p.l.c. (NYSE:BP) is working on achieving net zero greenhouse emission levels by 2050. The company intends to increase investment in low-carbon technology by ten times to $5 billion per year. Furthermore, BP p.l.c. (NYSE:BP) has decided to cease exploration in new countries and reduce crude oil and natural gas production by two-fifth in the next decade.
BP p.l.c. (NYSE:BP) has also undertaken serious initiatives related to EV charging in countries like China, Germany, and the UK. On September 12, Ryan Todd at Piper Sandler increased the target price for BP p.l.c. (NYSE:BP) from $44 to $47 and maintained an Overweight rating on the stock.
BP p.l.c. (NYSE:BP) recorded surplus cash flow of $6.6 billion in Q2 2022. The company intends to utilize $3.5 billion for share buybacks. Analysts believe that BP p.l.c.’s (NYSE:BP) PE ratio of 4.2x reflects that the company is trading at a discount to its fair value. The stock offers an annual forward dividend yield of 4.67% as of September 30. BP p.l.c.’s (NYSE:BP) strong fundamentals merit its inclusion amongst the best European stocks.
4. Novo Nordisk A/S (NYSE:NVO)
Number of Hedge Fund Holders: 32
Novo Nordisk A/S (NYSE:NVO) is a Denmark-based pharmaceutical company with a leadership position in the insulin market.
The company is responsible for producing 50% of the insulin in the world, fulfilling the need of more than 34 million people worldwide. Novo Nordisk A/S (NYSE:NVO) has already produced more than 600 million insulin pens as of 2022. In a research note issued to investors on September 28, Martial Descoutures at Oddo BHF upgraded Novo Nordisk A/S (NYSE:NVO) stock from a Neutral to an Outperform rating and maintained a target price of $119.53.
Novo Nordisk A/S (NYSE:NVO) is considered amongst the best European stocks as the company is not only focused on treating diabetes through its insulin offerings but is also diversifying in the growing obesity care segment. It is an emerging and growing trend that is receiving a lot of hype in the pharma world. Novo Nordisk A/S (NYSE:NVO) has been able to increase its earnings by 16.7% every year since going public and has outperformed its competitors in terms of profit margins in 2022.
Here’s what Baron Funds said about Novo Nordisk A/S (NYSE:NVO) in its Q1 2022 investor letter:
“We added to our position in Novo Nordisk A/S, a leading global biopharmaceutical company headquartered in Denmark that specializes in treatments for diabetes, obesity, and other chronic diseases. We wrote about Novo Nordisk in last quarter’s letter. We continue to believe Novo Nordisk’s diabetes and anti-obesity franchise will drive attractive revenue and earnings growth for many years to come. We think both Novo Nordisk and competitor Eli Lilly and Company(which we also own in the Fund) can be successful in these large markets.”
3. Shell plc (NYSE:SHEL)
Number of Hedge Fund Holders: 39
Shell plc (NYSE:SHEL) is a London, UK-based diversified energy company that has a presence in over 70 countries and a headcount of over 80,000 employees. The company is at the third position on our list of the ten best European stocks to buy now.
Like other all-energy majors, Shell plc (NYSE:SHEL) is aggressively working towards becoming a net-zero greenhouse emissions company by 2050. Experts think that Shell plc (NYSE:SHEL) has a solid balance sheet with a manageable amount of debt. The company is heavily focused on green energy as it operates 90,000 charging points on its retail sites for electric vehicles. Shell plc (NYSE:SHEL) intends to establish 500,000 charging points by 2025. The company is also working on building the biggest hydrogen plant in Europe that will be able to produce 60 tons of renewable hydrogen per day.
Shell plc (NYSE:SHEL) offers an annual forward dividend yield of 3.82%, translating into a payout ratio of 20.7% as of September 30. The stock is up over 35% YTD, in comparison to the S&P 500’s loss of 22.51% during the same period.
Third Point Management shared its bullish outlook on Shell plc (NYSE:SHEL) in its Q1 2022 investor letter. Here’s what the firm said:
“We have continued to add to our position in Shell, as it trades at the same deeply discounted multiple today that it did last year due to a move up in commodity prices. We are engaged in discussions with management, board members, and other shareholders, as well as informal talks with financial advisors. We have discussed various alternatives with the aim of both increasing shareholder value and allowing Shell to effectively manage the energy transition. We have reiterated our view that Shell’s portfolio of disparate businesses ranging from deep water oil to wind farms to gas stations to chemical plants is confusing and unmanageable. Most investors we have discussed this with agree that the company would be more successful over the long term with a different corporate structure. Discussions among the parties have been constructive and will be ongoing since stakeholders clearly see these corporate changes as instrumental, particularly if Shell wishes to become a leader in the energy transition rather than be left behind as a tarnished legacy brand.
Beyond our discussions around corporate structure, there have been two important developments since our last update. First, Shell announced a plan to redomicile its headquarters to the UK and create a single shareholder class. This move allows greater flexibility to modify its portfolio (either through asset sales or spin-offs) and allows for a more efficient return of capital, specifically via share repurchases. Second, fundamental and geopolitical events have highlighted the strategic importance of reliable energy supplies, especially in Europe. Shell’s LNG business, the largest in the world outside of Qatar, will play a critical role in ensuring energy security for Europe. In our view, the value of this business has increased dramatically since our original investment.
While Shell continues to trade at a large discount to its intrinsic value, with proper management we believe the company can simultaneously deliver shareholder returns, reliable energy and decarbonization of the global economy. We look forward to continued engagement with management and other shareholders and to more strategic clarity from the Company.”
2. ASML Holding N.V. (NASDAQ:ASML)
Number of Hedge Fund Holders: 47
ASML Holding N.V. (NASDAQ:ASML) is a Netherlands-based semiconductor company founded in 1984. The company is a maker of lithography systems for manufacturing semiconductor chips.
On August 31, Francois-Xavier Bouvignies at UBS upgraded ASML Holding N.V. (NASDAQ:ASML) stock from a Neutral to a Buy rating and increased the target price from $615.71 to $635.26. The target price provides a potential upside of over 50% from the stock price as of September 30. The analyst believes that ASML Holding N.V. (NASDAQ:ASML) stock is one of the best European stocks to invest in during the current uncertain macroeconomic environment. Bouvignies thinks ASML Holding N.V. (NASDAQ:ASML) stock offers limited downside risk, given the company’s strong pricing power over its customers and significant market presence.
ASML Holding N.V. (NASDAQ:ASML) has a monopoly position in the semiconductor industry because of its specialty in producing cutting-edge lithography systems. Experts believe the company has robust intangible assets due to high investment in research and development (R&D). Over the last decade, 17.5% of ASML Holding N.V.’s (NASDAQ:ASML) revenue was invested in R&D, amounting to $14.2 billion.
Here’s what Baron Funds said about ASML Holding N.V. (NASDAQ:ASML) in its Q2 2022 investor letter:
“ASML Holding N.V. designs and manufactures semiconductor production equipment. It specializes in photolithography equipment, where light sources are used to photo-reactively create patterns on wafers that become printed circuits. ASML is the dominant leader across all types of lithography but, most importantly, is the only company selling equipment for extreme ultra-violet (EUV) lithography, the latest generation technology.
Indeed, because of the stalling out of Moore’s Law, advanced lithography of larger and multi-patterned silicon chips has been critical for leading-edge chip manufacturing and continued improvement in semiconductor chip performance over time. The company is well positioned to continue growing above industry rates as it rapidly adds capacity across its entire business to meet rising industry demand, especially from leading-edge customers continuing to invest to stay ahead of their competitors and drive chip performance forward.
Additionally, the introduction of high-NA EUV technology in the middle of the decade will add another leg to the growth opportunity.”
As of Q2 2022, ASML Holding N.V. (NASDAQ:ASML) was held by 47 hedge funds.
1. Linde plc (NYSE:LIN)
Number of Hedge Fund Holders: 48
Linde plc (NYSE:LIN) is a Dublin, Ireland-based engineering and industrial gas company. It is the biggest industrial gas company in the world in terms of revenue and market share.
Geoff Haire at UBS gave Linde plc (NYSE:LIN) stock a target price of $320, along with a Buy rating on September 12. The analyst is confident that the company will face macroeconomic headwinds strongly and deliver EBIT growth to its investors in the coming quarters. Some experts consider the nature of Linde plc’s (NYSE:LIN) business as defensive. Linde plc (NYSE:LIN) is expected to weather the economic uncertainty due to its long-term contracts and strong margins. Furthermore, the EU has also shown support for entities manufacturing hydrogen and other important gases.
Analysts think Linde plc (NYSE:LIN) is supported by a high-quality order backlog and a strong internal rate of return. Linde plc (NYSE:LIN) offers an annual payout of $4.68 as of September 30, translating into a forward dividend yield of 1.65%.
ClearBridge Investments shared its stance on Linde plc (NYSE:LIN) in its Q2 2022 investor letter. Here’s what the firm said:
“The replacement of demand for Russian gas with green hydrogen positions Linde (NYSE:LIN) well. Green hydrogen, made by using renewable energy to split water into its basic elements, hydrogen and oxygen, and subsequently cleanly burn the hydrogen as fuel, is seen as key to lowering emissions in hard-to-decarbonize industries such as steel and cement, as well as transport. In 2021 Linde announced a long-term agreement to provide European semiconductor maker Infineon (OTCQX:IFNNY) with onsite production and storage of green hydrogen for the company’s site in Villach, Austria. Securing a clean, domestic source of energy for semiconductor manufacturing appears strategic today amid heightened concerns of reliable supply from Taiwan.