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Climate change investing is hot! Swiss Saxo Bank had a 78% year-to-date gain on a group of 56 global stocks. All were highlighted in January as the best positioned to benefit from climate change policy. Renewable energy stocks from The Motley Fool. New PIMCO ESG Income Fund and Vanguard ESG US Corporate Bond ETF. MorePODCAST: Climate Change Investing Outperforms! And More…
Transcript & Links, Episode 42, October 9, 2020
Hello, Ron Robins here. Welcome to podcast episode 42 published on October 9 titled “Climate Change Investing Outperforms! And More…”— and presented by Investing for the Soul. investingforthesoul.com is your site for vital global ethical and sustainable investing news, commentary, information, and resources.
Remember that you can find a full transcript, links to content – including stock symbols and bonus material – at this episode’s podcast page located at investingforthesoul.com/podcasts.
And Google any terms that are unfamiliar to you.
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Now, would you like to get a 78% year-to-date return on a portfolio of green and ESG stocks? Well, James Phillipps wrote an article for Forbes titled Climate Change Investing May Not Be Your Thing, But A 78% YTD Return Is.
Here are some quotes from Mr. Phillipps’ article. He says “There is an absolutely gigantic wall of money moving into environmental stocks and it is only going to get bigger.
The European Commission, European Central Bank (ECB), and China have all announced major policy initiatives in the past fortnight underlining their commitment to reducing carbon emissions.
The strategy has been a standout performer through the Covid-19 pandemic. A basket of 56 global stocks which Saxo Bank highlighted in January as the best positioned to benefit from climate change policy is up a whopping 78% year to date. That compares to the S&P 500’s 1.2% rise and 24.5% for the S&P Information Technology sector.” End quotes.
You can get a full downloadable list of these companies with their respective stock returns by going to the article titled Green stocks are the next mega trend in equities. It appears on the Saxo Bank’s website. The list is titled ‘Inspirational list of stocks with exposure to the climate theme.’ You can also get the direct link from this podcasts’ page located at investingforthesoul.com/podcasts and scroll down to this episode.
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Continuing on the climate change investing theme is an article titled 3 Top Renewable Energy Stocks to Buy in October. I found it on Nasdaq.com though it was written for The Motley Fool site. Each recommendation is by a different analyst.
I’ll first mention the analyst’s name followed by the stock they recommend and a few quotes from them about the stock. Quote.1) “Travis Hoium recommends SunPower (SPWR)
Customers can go on its website and get a solar design in less than a minute, replacing costly door-to-door sales that have long driven the industry's sales. SunPower then provides those leads to local partners, who use SunPower-provided solar panels, monitoring, and racking for their solar installation. Long term, working with these smaller, more nimble installers and leveraging digital sales should lead to better pricing and a higher market share for SunPower in residential solar.
Commercial solar is another big market, and SunPower is the No. 1 provider in the U.S. It designs solar systems for large industrial rooftops, and adds monitoring and in some cases energy storage. This isn't a high-margin business yet, but if SunPower can reduce costs, it could make commercial solar into a big and profitable business with a $3.5 billion pipeline and $400 million of contracted backlog…
Given the growth potential for solar in the U.S., investors should be excited about this business disrupting the market long term.2) Howard Smith likes NextEra Energy (NEE)
Long-term investing is the right way to grow wealth. But if short-term concerns are keeping you up at night, an investment that might fit your needs is NextEra Energy…
… it's easy to pick NextEra as a winner in the race to renewable energy production. Its subsidiary, NextEra Energy Resources, along with its affiliates, is the world's largest generator of wind and solar power. NextEra recently increased its near-term growth expectations, saying earnings for 2021 will be higher than its previous guidance, and extended its 6% to 8% annual growth expectations through 2023. It also announced a 4-for-1 stock split, as its shares have significantly outperformed the S&P 500 over the past several years.
Along with that growth, however, comes a more stable electric utility business. NextEra owns Florida Power & Light, the largest regulated electric utility in the U.S. by retail megawatt-hour sales, as well as Gulf Power, which serves the northwestern part of Florida. Though NextEra's dividend yield is lower than typical utilities at about 2%, it balances that with its growth in renewables.
So if you want to get into renewables ahead of the election, NextEra Energy might be the right stock for you. Regardless of politics, this business will continue its growth strategy, and is anchored with an electric utility to weather any ups and downs that may come from legislative policy direction.3) Jason Hall recommends Algonquin Power & Utilities (AQN)
There's a wonderful company based just north of the border in Canada, Algonquin Power & Utilities, that looks worth buying right now.
What makes Algonquin appealing? Like NextEra, it operates both regulated utilities and a non-regulated business selling wholesale power (called Liberty Power), and has focused heavily on developing renewable power assets. These include wind and solar, as well as using wood pellets made from waste wood instead of coal and natural gas in some of its older facilities. But I think Algonquin is in a better position to turn the growth of its unregulated renewable power business into outsize returns for investors. Algonquin generated $1.6 billion in revenue over the past year, less than 10% of NextEra's $19 billion in revenue.
Moreover, Algonquin just looks cheap right now, trading for about 15 times trailing earnings, while its dividend yield of 4% at recent prices is also very attractive. And since implementing a dividend in 2012, the payout has increased 126%; better yet, the payout ratio -- the percent of earnings it pays in dividends -- is below 50%, meaning it's both secure, and there's room to continue growing the dividend along with earnings in the years to come.
Whether you already own NextEra or not, or are just looking for another clean utility to own, Algonquin should be high on your list. At recent prices, it's worth buying now.” End quotes.
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When one of the world’s most prestigious fixed income firms launches an ESG income fund you know that green income funds have arrived! The announcement of the fund came in a press release titled PIMCO Launches PIMCO ESG Income Fund Class A (PEGAX).
Here are some quotes from the press release concerning the fund. Quote, “PIMCO, one of the world’s premier fixed income investment managers, has launched the PIMCO ESG Income Fund, which targets investments with strong Environmental, Social and Governance (ESG) credentials, while aiming to maintain a high and consistent level of dividend income for investors…
PIMCO’s ESG Fund offerings include the Total Return ESG Fund, the Enhanced Short Maturity Active ESG Exchange-Traded Fund, and the Climate Bond Fund… Like other products in the Income Suite, the PIMCO ESG Income Fund pursues a global, multi-sector and flexible approach, but is uniquely dedicated to ESG-related investments for those who want to pursue income from more sustainable sources.
PIMCO has been investing in socially responsible investments since 1989 and launched its first ESG-dedicated funds in 2017. PIMCO’s sustainable assets under management have grown to $157 billion, as of August 31, 2020.” End quotes.
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Continuing in the fixed income space is yet another new ESG bond fund. The Vanguard ESG US Corporate Bond ETF (VCEB).
Based on a press release, here are some key quotes.
“The fund provides investors access to the US corporate bond market and expands Vanguard’s current index-and-actively-managed ESG offerings. Vanguard ESG US Corporate Bond ETF seeks to track the performance of Bloomberg Barclays MSCI US Corporate SRI Select Index and is listed on the Chicago Board Options Exchange (Cboe) with a low expense ratio of 0.12 per cent…
Vanguard has offered ESG funds to US investors for more than two decades, beginning with Vanguard FTSE Social Index Fund (VFTAX) in 2000. In recent years, Vanguard has broadened its equity ESG lineup with the addition of two ETFs, Vanguard ESG US Stock ETF (ESGV) and Vanguard ESG International Stock ETF (VSGX), and an actively-managed offering, Vanguard Global ESG Select Stock Fund (VESGX). Vanguard ESG US Corporate Bond ETF marks Vanguard’s initial entrance into the ESG fixed income market, an area that is growing in investor demand. US investor assets in ESG fixed income mutual funds and ETFs doubled in 2019 to USD850 million, and today, stands at USD1.8 billion. The new ETF will further complement Vanguard’s ESG suite, offering asset class diversification through US corporate bond market exposure.” End quotes.
Well, these are my top news stories and their stock and fund tips -- for this podcast: “Climate Change Investing Outperforms! And more…”
To get all the links, stock symbols, or to read the transcript of this podcast -- and more -- go to investingforthesoul.com/podcasts and scroll down to this episode.
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Talk to you again on October 23. Bye for now.
© 2020 Ron Robins, Investing for the Soul