Sick of high petrol prices? Then buy this ASX share: analyst

Is it painful paying $2-something at the fuel bowser? Stock investors can get some of that money back by doing this.

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A man looks frustrated with head on hand as he fills up car at service station.

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While inflation has gripped the share markets this year, in the real world the most visible manifestation is when motorists drive into a petrol station.

For the first time, Australians in 2022 have had to get used to paying in the $2s for each litre of fuel they put in their cars.

Australia, along with the US, still has the lowest petrol prices in the developed world. But that is little consolation for a population that was used to paying a lot less only a few months ago.

However, investors of ASX shares can take back some of that cash that they’re handing over to the oil companies.

How? Here’s how one expert explains it:

‘A hedge to petrol pump pain’

Wilson Asset Management analyst Anna Milne recommended investors buy Santos Ltd (ASX: STO).

“If you’re wanting a hedge to petrol pump pain, I would say buy Santos,” she said in a Wilson video.

“It’s a producer, so it benefits from higher oil prices.”

With all the hoopla surrounding BHP Group Ltd (ASX: BHP) offloading its oil assets to Woodside Energy Group Ltd (ASX: WDS), Milne feels like Santos’ stock price has been “left behind”.

“Its current share price implies that oil is trading at $60 a barrel, when reality is it’s north of $100,” she said.

“We think it’s going to be elevated over the medium term. So we like Santos — it’s a buy.”

Many fans, but some dissent

It seems Milne’s peers generally agree.

Currently 15 out of 17 analysts surveyed on CMC Markets rate Santos as a buy. Twelve of those even recommend it as a strong buy.

The Motley Fool reported this week that Morgans is another investment team that favours Santos.

“We expect the resilience of Santos’ growth profile and diversified earnings base see it best placed to outperform against a backdrop of a broader sector recovery,” its research read.

Morgans has a $9.30 price target, which is about a 34% premium from the current level.

However, The Motley Fool’s Tristan Harrison begs to differ.

“Woodside Energy Group Ltd shares seem like a better pick compared to Santos Ltd, in my opinion,” he said earlier this week.

“While dividends aren’t everything, I think the bigger dividend yield from Woodside can help provide stronger returns.”

Motley Fool contributor Tony Yoo 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 Scott Phillips.

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