We recently compiled a list of the 10 Best Undervalued Stocks to Buy Right Now. In this article, we are going to take a look at where Chevron Corporation (NYSE:CVX) stands against the other best undervalued stocks.
As per Evercore, the equity market rally is expected to further accelerate under the Donald Trump presidency. The S&P 500 is expected to touch 6,600 by June end. This growth in the index is expected to stem from Trump’s deregulatory agency, which should fuel corporate profits. Trump is expected to act fast to enact his policies.
The investment firm went on to add that measures such as deregulation and corporate tax cuts are expected to fuel business activity and unlock significant rally in stocks. The bull market’s 2-year run stemmed from healthy growth from mega-cap technology stocks, and high valuations are expected to further rise. Evercore hinted at data demonstrating that the average bull market witnessed an increase of 152% over 50 months, while the current market saw a run-up of only 65% over the previous 25 months.
Trump’s Next Presidency- How Will It Affect US Economy?
After Donald Trump’s win, economists and market strategists have been assessing how his economic policies might affect the broader US economy and equity markets. While the initial reaction was positive, some experts opine that Trump’s plans might fuel inflation, which will hurt consumers hoping to get some respite from it. Trump’s tax plan revolves around extending the provisions in the TCJA. The provisions are yet to expire at 2025 end. These provisions consist of lowered tax brackets and expanded standard deduction.
Trump’s campaign proposed lowering the corporate tax rate to 15% from the current rate of 21%. What will be the impact on the economy? Well, the economy might initially grow moderately under Trump’s plans. That being said, the impact might fade over time, mainly because of the effect of deporting millions of immigrants, as per Oxford Economics. As per the chief U.S. economist at Oxford Economics, the real GDP might grow 0.3 percentage points higher in 2026 as compared to the situation if existing policies continue. However, in 2028, the GDP growth might eventually fall to 0.6 percentage points lower in 2028 as compared to earlier projections as a result of deportations and increased tariffs.
READ ALSO: 7 Best Stocks to Buy For Long-Term and 8 Cheap Jim Cramer Stocks to Invest In.
Inflation Under Trump’s Presidency
Consumers tend to rank inflation among their biggest economic concerns. Global economists and market strategists believe that Trump’s Presidency can reignite inflation worries. According to investing legend, Jim Rogers, Trump’s tariffs might increase domestic inflation. As a result, the US Fed will be forced to keep the interest rates high. He further added that higher tariffs on goods, commodities, and products will lead to increased global inflation.
Moreover, Trump has plans to deport millions of immigrants. This can also fuel inflation as employers will experience labor crunch, resulting in higher wages.
While there are some uncertainties regarding the potential impacts of Trump’s economic policies, market experts believe that investors can go long on stocks that remain undervalued despite the recent rally.
Our Methodology
To list the 10 Best Undervalued Stocks to Buy Right Now, we used a screener and sifted through several online rankings to extract the list of stocks trading at a forward P/E multiple of less than 15. Next, we selected the stocks which were popular among hedge funds. Finally, the stocks were ranked in the ascending order of their hedge fund sentiments, as of Q2 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
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Chevron Corporation (NYSE:CVX)
Forward P/E Ratio as of 8 November: 12.9x
Number of Hedge Fund Holders: 64
Chevron Corporation (NYSE:CVX) is engaged in integrated energy and chemicals operations in the US and internationally.
Wall Street analysts are optimistic about Chevron Corporation (NYSE:CVX)’s long-term growth prospects. This optimism stems from its strong operational execution throughout its upstream portfolio, which includes the Permian Basin, the DJ Basin, the Tengizchevroil (TCO) project, and the Gulf of Mexico (GOM). Experts believe that these assets are being advanced toward FCF generation. Apart from the Permian progress, the TCO project remains on schedule to start operations in H1 2025, which should enhance Chevron Corporation (NYSE:CVX)’s cash contributions.
Chevron Corporation (NYSE:CVX) has been implementing several strategic initiatives, which are targeted at improving its competitive position. For example, the company’s shift towards “Free Cash Flow (FCF) harvesting mode” throughout its core assets should act as a tailwind. This pivot focuses on structural cost savings and spending rationalization. Therefore, analysts expect Chevron Corporation (NYSE:CVX)’s financial flexibility to enhance, which can potentially lead to higher returns for shareholders.
Furthermore, the company is well-placed to ramp up its exploration activities, with a notable well in Guyana anticipated to begin operations in early 2025. This expansion of exploration efforts reflects Chevron Corporation (NYSE:CVX)’s commitment to long-term growth and confidence in tapping new resource opportunities.
Analysts at Barclays upped their target price on the shares of Chevron Corporation (NYSE:CVX) from $168.00 to $174.00, giving it an “Overweight” rating on 4th November. Carillon Tower Advisers, an investment management company, released its Q4 2023 investor letter. Here is what the fund said:
“Chevron Corporation (NYSE:CVX) traded lower, along with oil prices, and issued a disappointing earnings announcement due to overseas refining losses. Separately, the company announced an agreement to buy another energy company with operations offshore of Guyana, as well as in North Dakota, the Gulf of Mexico, and the Gulf of Thailand. This is a strategic acquisition for very little takeout premium.”
Overall, CVX ranks 5th on our list of the 10 best undervalued stocks to buy right now. While we acknowledge the potential of CVX as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued AI stock that is more promising than CVX but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.