10 Best ESG Stocks to Buy Now

·11 min read

In this article, we discuss the 10 best ESG stocks to buy now. If you want to skip our detailed analysis of these companies, go directly to the 5 Best ESG Stocks to Buy Now.

The internet is abuzz with speculation around the environmental, social, and corporate governance (ESG) practices at large corporations as a younger generation, that takes these issues very seriously, enters the workforce and begins to enact change in this regard. Already, the debate around the ESG movement, led by companies like Microsoft Corporation (NASDAQ: MSFT), Alphabet Inc. (NASDAQ: GOOG), and PayPal Holdings, Inc. (NASDAQ: PYPL), has begun to have a chain reaction around the world.

For investors keen on averaging handsome returns from their portfolios, the ESG-related metrics at top corporations are becoming an important part of the discussions around big money movement. Governmental policies designed to encourage ESG-related reforms, such as the American Jobs Plan by United States President Joe Biden, and aggressive online activism through internet platforms like Reddit and Twitter, have all provided additional incentives to businesses to change their policies to better align with responsible ESG practices.

Another important statistic that highlights the shift towards ESG is the increase in the number of institutional investors at companies over the past few decades. According to a study, institutional investors have nearly doubled their ownership in stocks since the early eighties, rising from 35% in 1982 to close to 60% by 2002, a number that has climbed higher over the past decade. These institutional investors tend to strategize in the long-term preferring to invest in firms with strong business fundamentals, often associated with responsible ESG practices.

However, in recent months, the influx of retail investors in the market has reversed the tide in this regard somewhat. The ease of stock market access, through trading applications like Robinhood, has exposed a new generation of investors to the stock world. These investors often do not see eye to eye with big finance, and bet against hedge funds shorting stocks. Despite this new dynamic, ESG remains central to the overall outlook on any firm, illustrated by the dramatic fall in the price of crypto stocks recently amid sustainability concerns.

The entire hedge fund industry is feeling the reverberations of the changing financial landscape. Its reputation has been tarnished in the last decade, during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017. Between March 2017 and February 26th 2021 our monthly newsletter’s stock picks returned 197.2%, vs. 72.4% for the SPY. Our stock picks outperformed the market by more than 124 percentage points (see the details here). We were also able to identify in advance a select group of hedge fund holdings that significantly underperformed the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 16th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.

Best ESG Stocks to Buy Now
Best ESG Stocks to Buy Now

Photo by Mark König on Unsplash

With this context in mind, here is our list of the 10 best ESG stocks to buy now. These companies were ranked keeping in mind the basic business fundamentals, hedge fund sentiment, and their relevance to the environmental, social and governance philosophy. We also consulted ESG ratings published by New York-based finance firm MSCI to gauge the overall appeal of these stocks to investors.

Best ESG Stocks to Buy Now

10. iRobot Corporation (NASDAQ: IRBT)

Number of Hedge Fund Holders: 17

iRobot Corporation (NASDAQ: IRBT) is placed tenth on our list of 10 best ESG stocks to buy now. The company’s shares have offered investors returns exceeding 15% over the course of the past six months. The company makes and sells different kinds of robots across the world. It has a good record on sustainability and is considered among the best in the world in terms of corporate practices and forward thinking. MSCI has a AA ESG rating on the firm, putting it among the industry leaders in this regard.

In quarterly earnings results, posted on May 3, iRobot Corporation (NASDAQ: IRBT) reported earnings per share of $0.41 for the first quarter of 2021, beating market predictions by $0.62. The revenue over the period was over $300 million, up 57% year-on-year.

Out of the hedge funds being tracked by Insider Monkey, Boston-based investment firm Arrowstreet Capital is a leading shareholder in iRobot Corporation (NASDAQ: IRBT) with 506,623 shares worth more than $61 million.

Just like Microsoft Corporation (NASDAQ: MSFT), Alphabet Inc. (NASDAQ: GOOG), and PayPal Holdings, Inc. (NASDAQ: PYPL), iRobot Corporation (NASDAQ: IRBT) is one of the best ESG stocks to buy now.

9. West Pharmaceutical Services, Inc. (NYSE: WST)

Number of Hedge Fund Holders: 26

West Pharmaceutical Services, Inc. (NYSE: WST) is a company that makes and sells delivery systems for injectable drugs and other healthcare products. The stock has returned more than 59% to investors over the course of the past year. It is ranked ninth on our list of 10 best ESG stocks to buy now. MSCI has a AA ESG rating on the company, highlighting the track record of the firm in the environmental, social, and corporate governance areas.

West Pharmaceutical Services, Inc. (NYSE: WST) is a solid option for those who want some income on the side when investing in stocks. On May 5, the firm declared a quarterly dividend of $0.17 per share, in line with previous. The forward yield was 0.21%.

At the end of the first quarter of 2021, 26 hedge funds in the database of Insider Monkey held stakes worth $419 million in West Pharmaceutical Services, Inc. (NYSE: WST), down from 34 in the preceding quarter worth $455 million.

Just like Microsoft Corporation (NASDAQ: MSFT), Alphabet Inc. (NASDAQ: GOOG), and PayPal Holdings, Inc. (NASDAQ: PYPL), West Pharmaceutical Services, Inc. (NYSE: WST) is one of the best ESG stocks to buy now.

In its Q3 2020 investor letter, Baron Asset Fund, an asset management firm, highlighted a few stocks and West Pharmaceutical Services, Inc. (NYSE: WST) was one of them. Here is what the fund said:

“West Pharmaceutical Services, Inc. manufactures components and systems for the packaging and delivery of injectable drugs. Shares rose on strong second quarter financial results and raised 2020 guidance. Business is benefiting from strong demand for West’s products and services, as the large majority of newly approved biologic drugs utilize the company’s packaging. We think demand should further accelerate as COVID-19 vaccine manufacturers come to market. We continue to believe West has a promising long-term growth outlook and a secure competitive position.”

8. Cadence Design Systems, Inc. (NASDAQ: CDNS)

Number of Hedge Fund Holders: 30

Cadence Design Systems, Inc. (NASDAQ: CDNS) stock has returned 42% to investors in the past year. It is placed eighth on our list of 10 best ESG stocks to buy now. The ESG rating for the firm by MSCI is AA. The company offers services related to integrated circuit design. These services include software, hardware, and other offerings. The firm also provides digital IC design products worldwide.

On June 25, investment advisory Rosenblatt initiated coverage on Cadence Design Systems, Inc. (NASDAQ: CDNS) stock with a Buy rating and a price target of $156, highlighting the brand name of the company in the analog tools department worldwide.

At the end of the first quarter of 2021, 30 hedge funds in the database of Insider Monkey held stakes worth $1.49 billion in Cadence Design Systems, Inc. (NASDAQ: CDNS), down from 32 in the preceding quarter worth $1.40 billion.

Just like Microsoft Corporation (NASDAQ: MSFT), Alphabet Inc. (NASDAQ: GOOG), and PayPal Holdings, Inc. (NASDAQ: PYPL), Cadence Design Systems, Inc. (NASDAQ: CDNS) is one of the best ESG stocks to buy now.

7. Pool Corporation (NASDAQ: POOL)

Number of Hedge Fund Holders: 41

Pool Corporation (NASDAQ: POOL) is ranked seventh on our list of 10 best ESG stocks to buy now. The stock has returned 65% to investors in the past twelve months. The firm primarily sells swimming pool supplies, leisure products, and other water-related equipment in many different countries around the world. The MSCI ESG rating for the firm is AA as well, placing it among the top firms in the country that have a great track record on environment and governance.

Pool Corporation (NASDAQ: POOL) is another good option for those who are looking to retire early. On May 4, the firm declared a quarterly dividend of $0.80 per share, an increase of close to 38% compared to the previous dividend. The forward yield was 0.74%.

Out of the hedge funds being tracked by Insider Monkey, New York-based investment firm Select Equity Group is a leading shareholder in Pool Corporation (NASDAQ: POOL) with 871,981 shares worth more than $301 million.

Just like Microsoft Corporation (NASDAQ: MSFT), Alphabet Inc. (NASDAQ: GOOG), and PayPal Holdings, Inc. (NASDAQ: PYPL), Pool Corporation (NASDAQ: POOL) is one of the best ESG stocks to buy now.

In its Q1 2021 investor letter, Polen Capital, an investment management firm, highlighted a few stocks and Pool Corporation (NASDAQ: POOL) was one of them. Here is what the fund said:

“During the quarter, we exited our position in Pool Corp. to redeploy the assets in areas that we believe offer a more attractive risk/return profile. Pool Corp. was a subscale position in the strategy after underperforming over the past year. The company’s results remain attractive, and the pool industry demand remains healthy as trends such as rising pool ownership, more pool usage, and investment in outdoor living have accelerated as a result of the pandemic. That said, after reporting much better than expected results in 2020, we think 2021 could be a more challenging year for the company with the potential for changing consumer behavior as pandemic conditions improve.”

6. NVIDIA Corporation (NASDAQ: NVDA)

Number of Hedge Fund Holders: 80

NVIDIA Corporation (NASDAQ: NVDA) is a company that makes and sells visual computing hardware. The company’s shares have returned over 109% to investors over the course of the past year. It is placed sixth on our list of 10 best ESG stocks to buy now. MSCI has a AAA ESG rating for the company, cementing the reputation of the firm as the leader among leaders in the practice of responsible corporate governance and sustainable business practices.

On June 28, investment advisory Citi maintained a Buy rating on NVIDIA Corporation (NASDAQ: NVDA) stock with a price target of $720. The investment advisory also lifted prospects of an important NVIDIA arms deal going through to 30% from 10%.

At the end of the first quarter of 2021, 80 hedge funds in the database of Insider Monkey held stakes worth $6.2 billion in NVIDIA Corporation (NASDAQ: NVDA), down from 88 the preceding quarter worth $8.6 billion.

Just like Microsoft Corporation (NASDAQ: MSFT), Alphabet Inc. (NASDAQ: GOOG), and PayPal Holdings, Inc. (NASDAQ: PYPL), NVIDIA Corporation (NASDAQ: NVDA) is one of the best ESG stocks to buy now.

In its Q1 2021 investor letter, Vulcan Value Partners, an asset management firm, highlighted a few stocks and NVIDIA Corporation (NASDAQ: NVDA) was one of them. Here is what the fund said:

“NVIDIA Corp. is the dominant supplier of Graphics Processing Units (GPUs) worldwide. NVIDIA’s GPUs are at the intersection of a number of important computing trends including the movement to the Cloud, artificial intelligence, autonomous vehicles, edge computing, gaming, and more. We previously owned NVIDIA and sold it in the third quarter of 2020 as the price to value gap closed and our margin of safety was reduced. As with all our MVP companies, we continued to follow NVIDIA closely. Since that time, NVIDIA reported excellent results and its value has compounded rapidly. The technology selloff at the beginning of the year negatively affected the stock price while our estimate of NVIDIA’s value per share increased. This happy combination of events created a margin of safety and an opportunity to once again add NVIDIA to the portfolio.”

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Disclose. None. 10 Best ESG Stocks to Buy Now is originally published on Insider Monkey.