Why are AGL (ASX:AGL) shares having such a stellar start to 2022 while the ASX 200 is struggling?

AGL has gone from zero to hero…

| More on:
An oil miner with his thumbs up.

Image source: Getty Images

Key points

  • AGL was one of the worst performing ASX 200 shares of 2021
  • But 2022 has given this company a fresh start
  • That’s despite the ASX 200 going into correction territory…

As investors of AGL Energy Limited (ASX: AGL) would know, 2021 was not a great year for the ASX stalwart. In fact, with its 48.6% share price decline over the year that was, AGL was one of the 5 worst-performing shares on the S&P/ASX 200 Index (ASX: XJO) last year.

But in a surprise turnaround, this embattled energy generator and retailer has had what could be described as an unbelievably positive start to 2022. As my Fool colleague Bernd covered earlier today, AGL shares are one of the best ASX 200 performers over 2022 thus far. AGL shares are up a very pleasing 11.4% year to date. That includes the 0.3% the shares have added so far today at the time of writing, up to $7.02 a share.

And of course, that has occurred at the same time the ASX 200 has fallen off the proverbial cliff over 2022 so far, entering ‘correction territory’ just this week.

So AGL has quickly gone from a 2021 zero to a 2022 hero (so far, anyway). So what’s behind this ‘comeback kid’ tale?

AGL shares go from (not quite) zero to hero

Well, it’s not entirely clear why investors have changed their minds over AGL shares. It’s possible that the bevvy of positive broker recommendations we have seen have assisted. As my colleague covered, AGL has been the beneficiary of some love from not one, but two ASX brokers over January. Credit Suisse and JP Morgan have both given AGL shares a buy rating this month. Credit Suisse sees AGL at $8.560 a share in the next 12 months, while JP Morgan is estimating the company will reach $7.55.

The brokers point to AGL’s inherent defensiveness, as well as recovering global energy markets, as the reasons why they see the company heading higher from here.

Another factor that might be at play is AGL’s valuation is having a blue-chip share like AGL descend more than 70% over the past 5 years is a meaningful move. It’s possible that when the company hit a multi-decade low of $5.10 a share late last year, value investors decided that it was too cheap to ignore. Since those lows, the AGL share price is now up more than 36%.

Whatever the reason, we can’t escape the fact that AGL shareholders have now enjoyed the best couple of months for this share that we have seen in years. No doubt investors will be hoping the train keeps rolling, but we shall have to wait and see.

At the current AGL share price, this company has a market capitalisation of $4.63 billion, with a trailing dividend yield of 9.25%.

Should you invest $1,000 in AGL Energy right now?

Before you consider AGL Energy, you'll want to hear this.

Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now... and AGL Energy wasn't one of them.

The online investing service he’s run for over a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.

*Returns as of January 13th 2022

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Energy Shares

Close up of a miner wearing a hard hat with a solemn look on his face, with an oil drill in the background.
Energy Shares

Woodside share price lifts despite Twiggy’s latest ‘greenwashing’ accusations

What's impacting the Woodside share price today?

Read more »

Workers inspecting a gas pipeline.
Energy Shares

AGL share price bounces back amid latest demerger opposition

Here's the latest criticism of AGL's planned demerger.

Read more »

Coal-fired power station generic.
Energy Shares

How dependant on coal closure is the AGL share price?

Climate activists disagree with AGL's decision to hold onto coal, saying its depleting shareholder value.

Read more »

A girl holding a globe shouts into a green megaphone about climate change.
Energy Shares

Why are Fortescue and green hydrogen making news again on Friday?

The company's green energy leg has earmarked a coal-fired power plant as a future hydrogen production facility.

Read more »

A businesswoman and businessman look sideways at each other during a dispute at their laptops.
Energy Shares

AGL share price lifts despite Greenpeace accusing leadership of being ‘caught with their pants down’

The climate-focused organisation said AGL has "the memory of a goldfish and the agility of an elephant".

Read more »

a coal miner in hard hat with a light on it kisses a large lump of coal that he is holding in his hand.
Energy Shares

Why are these ASX coal shares having a top run today?

Newcastle coal futures are up on Thursday.

Read more »

A group of businesspeople hold green balloons outdoors.
Energy Shares

Own APA shares? Here’s the latest on the company’s ‘ground breaking’ green hydrogen project

The company has taken another step towards transporting green hydrogen.

Read more »

Workers inspecting a gas pipeline.
Energy Shares

What’s happening with ASX 200 energy shares this week?

US oil production forecasts have been scaled back, but global demand may fall enough to send energy prices lower.

Read more »