Jul 22, 2022
ESG funds — portfolios that stress environmental, social, and governance factors — have grown in popularity in recent years. But you might be surprised at what these funds actually hold these days.
According to data from Bank of America, 6% of ESG funds in Europe now have investments in Shell — one of the oil and gas supermajors. A year ago, none of the funds owned the company.
Advertisement
“We believe [some] ESG funds are revisiting the cost of exclusion [of energy companies] given their underperformance in the first half of 2022 or waiting for regulations to be finalised amid greenwashing fears,” says Bank of America’s ESG strategist Menka Bajaj.
Thanks for subscribing!
Read the best of Moneywise in 5 minutes or less.
By signing up, you accept Moneywise Terms of Use, Subscription Agreement, and Privacy Policy.
With strong oil prices, traditional energy stocks are firing on all cylinders. The Energy Select Sector SPDR Fund (XLE) is up 24% year to date. That’s in stark contrast with the S&P 500’s 17% decline over the same period.
In fact, Wall Street sees further upside in the sector. Here’s a look at three companies that analysts find particularly attractive.
Shell (SHEL)
Let’s start with Shell — the company so attractive that even ESG funds couldn’t say no to.
Headquartered in London, Shell is a multinational energy giant with operations in more than 70 countries. It produces around 3.2 barrels of oil equivalent per day, has an interest in 10 refineries, and sold 64.2 million tons of liquefied natural gas last year.
It’s a staple for global investors, too. Shell is listed on the London Stock Exchange, Euronext Amsterdam, and the New York Stock Exchange.
Energy stocks have pulled back over the past month and Shell was caught in the sell-off as well. However, its NYSE-listed shares are still up 9.4% year to date.
Piper Sandler analyst Ryan Todd sees opportunity in the company. On Tuesday, the analyst reiterated an ‘overweight’ rating on Shell while raising his price target from $69 to $75.
Considering that Shell trades at around $49 per share today, Todd’s new price target implies a potential upside of 53%.
Advertisement
Must Read
- The ultra-rich use these 5 real estate strategies to build wealth while they sleep — you can start with just $100
- Here’s the average income of Americans by age in 2026. Are you keeping up or falling behind?
- Insurance companies profit most from drivers who auto-renew without shopping around. Comparing 100+ quotes takes 2 minutes and costs nothing
Join 250,000+ readers and get Moneywise’s best stories and exclusive interviews first — clear insights curated and delivered weekly. Subscribe now.
Chevron (CVX)
Chevron is another oil and gas supermajor that’s benefiting from the commodity boom.
For Q1, the company reported earnings of $6.3 billion, which more than quadrupled the $1.4 billion in the same period last year. Revenue totaled $54.4 billion for the quarter, up 70% year over year.
In January, Chevron’s board approved a 6% increase to the quarterly dividend rate to $1.42 per share. That gives the company an annual dividend yield of 3.9%.
The stock has enjoyed a nice rally too, climbing 22% in 2022.
Advertisement
HSBC analyst Gordon Gray expects the fun to continue. The analyst recently upgraded Chevron from ‘hold’ to ‘buy’ and set a price target of $167 — roughly 15% above where the stock sits today.
Exxon Mobil (XOM)
Commanding a market cap of nearly $370 billion, Exxon Mobil is bigger than Shell and Chevron.
The company also boasts the strongest stock price performance among the trio in 2022 — Exxon shares are up 38% year to date.
It’s not hard to see why investors like the stock: the oil-producing giant gushes profits and cash flow. In Q1, Exxon earned $5.5 billion in profits, a huge increase from the $2.7 billion in the year-ago period. Free cash flow totaled $10.8 billion for the quarter, compared to $6.9 billion in the same period last year.
Solid financials allow the company to return cash to investors. Exxon pays quarterly dividends of 88 cents per share, translating to an annual yield of 4.0%. Management has also increased the company’s share repurchase program to up to $30 billion through 2023.
Bank of America analyst Doug Leggate has a ‘buy’ rating on Exxon and a price target of $120. That implies a potential upside of 37% from the current levels.
You May Also Like
- JP Morgan sees gold hitting $6,000/oz before 2027 — and a Gold IRA lets you hold the physical metal while deferring the tax bill. Get your free guide from Priority Gold
- Dave Ramsey warns nearly 50% of Americans are making 1 big Social Security mistake — here’s what it is and the simple steps to fix it ASAP
- Thanks to Jeff Bezos, you can now become a landlord for as little as $100 — and no, you don't have to deal with tenants or fix freezers. Here's how
- Millionaires under 43 are reshaping investing — just 25% of their portfolios are in stocks. Here’s where their money is going
Jing is an investment reporter for Moneywise. He is an avid advocate of investing for passive income. Despite the ups and downs he’s been through with the markets, Jing believes that you can generate a steadily increasing income stream by investing in high quality companies.
