Is it Still Safe to Invest in Shell plc (SHEL)?

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Third Point Management, an investment management firm, published its first-quarter 2022 investor letter – a copy of which can be downloaded here. During the First Quarter, Third Point returned -11.5% in the flagship Offshore Fund. Try to spend some time taking a look at the fund’s top 5 holdings to be informed about their best picks for 2022.

In its Q1 2022 investor letter, Third Point Management mentioned Shell plc (NYSE:SHEL) and explained its insights for the company. Founded in 1907, Shell plc (NYSE:SHEL) is a London, United Kingdom-based publicly traded multinational oil and gas company with a $217.1 billion market capitalization. Shell plc (NYSE:SHEL) delivered a -2.74% and it closed at $57.70 per share on May 06, 2022.

Here is what Third Point Management has to say about Shell plc (NYSE:SHEL) in its Q1 2022 investor letter:

“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.”

Shell, Gas, Gasoline

Photo by Marc Rentschler on Unsplash

Our calculations show that Shell plc (NYSE:SHEL) fell short and didn’t make it on our list of the 30 Most Popular Stocks Among Hedge Funds. Shell plc (NYSE:SHEL) was in 41 hedge fund portfolios at the end of the fourth quarter of 2021, compared to 33 funds in the previous quarter. Shell plc (NYSE:SHEL) delivered a 4.34% return in the past 3 months.

In May 2022, we published an article that includes Shell plc (NYSE:SHEL) in 5 Best UK Stocks To Invest In Now. You can find other investor letters from hedge funds and prominent investors on our hedge fund investor letters 2022 Q1 page.

Disclosure: None. This article is originally published at Insider Monkey.