Petrobras: The Most Undervalued Energy Stock Today

Summary

• With the energy market likely staying tight for years, large oil companies may be one of the precarious stock market's few havens.
• Foreign energy companies like Brazil's Petrobras may have a strong currency advantage due to their solid exports and geopolitical neutrality.
• Petrobras trades at a 50-70% discount, has a much higher yield, and has more substantial margins than its U.S. energy peers.
• While Petrobras is under fire for raising prices, its overall political risk is likely no higher than U.S. energy companies - being threatened with a 50% profit growth tax.
• Brazil's government ownership of Petrobras is a double-edged sword as it gives the government control of the company but also incentivizes Brazil's government to protect its dividend.

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Objectively, 2022 has been an awful year for the stock market. All sectors are down by double digits YTD besides energy, which has risen by around 31%. After years of underperformance and contempt, energy stocks are

Analyst’s Disclosure:I/we have no stock, option or similar derivative position in any of the companies mentioned, but may initiate a beneficial Long position through a purchase of the stock, or the purchase of call options or similar derivatives in PBR over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.