The AGL Energy Limited (ASX: AGL) share price has been under pressure in 2020.
While the S&P/ASX 200 Index (ASX: XJO) is down 11.1% this year, AGL’s value has plummeted 16% to $17.25 per share at the time of writing.
Why AGL Energy shares have slumped lower this year
AGL is currently trading at just $17.25 but started the year at $20.58. The oil price war between OPEC+ and Russia hit ASX energy shares hard in February.
However, AGL isn’t a large oil producer compared to its energy peers like Santos Ltd (ASX: STO). The Santos share price has fallen 33.4% in 2020 which probably reflects the higher oil exposure compared to AGL.
In contrast, AGL is one of the largest ASX-listed investors in renewable energy. AGL has strong interests in renewables which could be a real bonus as Australia looks to kickstart its economy.
Fellow ASX energy share Origin Energy Ltd (ASX: ORG) is down 29.8% this year, which means AGL seems to be outperforming its peers with its 16% drop.
But given the non-cyclical nature of earnings, could AGL shares actually be undervalued?
Is $1,000 worth of shares a smart investment?
Despite relatively strong performance compared to its ASX energy peers, AGL is still underperforming the ASX 200 benchmark index.
However, I think AGL shares still have strong potential to outperform in 2020. If we are set for tough economic times this year, that could mean AGL is a good buy for income.
If earnings remain solid in August, that could bode well for further share price growth towards the end of the year.
Of course, if the sector bounces back then arguably Origin may be better value given its strong declines.
It’s very hard for even the best investors to pick good value ASX shares right now. AGL shares have underperformed so far this year but could be a cheap buy if you’re buying and holding for the long-term.
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Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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