The U.S. equity strategy team at Goldman Sachs attempted to assess the effects of ESG investing on stock performance and valuations in a research report this week.
The most surprising statistics detailed the explosion in interest in the trend. Analyst Arjun Menon noted that the US$47-billion invested in ESG-specific funds in 2020 was double the total of the previous five years combined.
The sheer scale of new inflows pushed ESG stocks higher, and the average 12-month return of 30 per cent on related funds outpaced the S&P 500 by 9.0 per cent.
Goldman Sachs recommends two different strategies to benefit from the rise of ESG investing. One, add stocks from the company’s list of renewable power stocks. This list includes two Canadian companies - Brookfield Renewable Corp. and Guelph, Ont.-based Canadian Solar Inc. (I posted the full list of stocks in the renewable power basket on social media here).
The second strategy involves a sector-neutral U.S. equity portfolio that emphasizes companies with higher ESG ratings within each sector. This is not one easily implemented by the average investor.
Not to be outdone, Morgan Stanley analyst Stephen Byrd also published an ESG-friendly research report Wednesday. Mr. Byrd surveyed a number of U.S. energy policy analysts to get a sense of how President Joe Biden’s decarbonization efforts will unfold and which companies will benefit.
Another Canadian stock – Ballard Power Systems Inc. – was listed as a major beneficiary from potential government investment in (or subsidies for) hydrogen power development. U.S.-based New Fortress Energy Inc. A and NextEra energy Inc. are also included in this theme.
Mr. Byrd also expects public financial support for energy storage projects, clean energy research, electric vehicles, wind, solar and fuel cell tax credits and carbon capture technology. A short list of companies expected to profit from these programs includes Tesla Inc., General Motors, Aptiv PLC, Bloom Energy Corp., Occidental Petroleum Corp., and SolarEdge Technologies Inc.
The overriding sense I get from these reports is one of momentum, and that the election of Biden is accelerating a trend towards decarbonization that was already quickly building strength.
-- Scott Barlow, Globe and Mail market strategist
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Stocks to ponder
Rogers Communications Inc. (RCI-B-T) Shares of this telecom are breaking out to the upside and have recently exhibited a bullish technical signal known as a “golden cross.” Jennifer Dowty reports.
CareRX Corp. (CRRX-T) This stock surged this week after the company said it was buying SmartMeds Pharmacy Inc., a specialty pharmacy serving over 2,400 residents in long-term care and assisted living settings in Ontario. Analysts and investors say the deal is one of many Toronto-based CareRX is expected to do in the months ahead to grab a greater share of the seniors’ pharmacy market. Brenda Bouw reports.
The Rundown
Smaller investors face down hedge funds, as GameStop soars
A head-scratching David and Goliath story is playing out on Wall Street over the stock price of a money-losing videogame retailer. An army of smaller-pocketed, optimistic investors is throwing dollars and buy orders at the stock of GameStop — in direct opposition to a group of wealthy investors who are counting on the stock price to plunge. The resulting action is wild, with GameStop’s stock soaring nearly 145% in less than two hours Monday morning, only for the gains to disappear quickly afterward. On Tuesday and Wednesday of this week, the stock action has been no less incredible. The Associated Press takes a look at what’s going on.
Also see:
The big short: GameStop effect puts global bets worth billions at risk
Retail trading frenzy sparks jitters for noted GameStop short-seller
Costly short squeeze makes Reddit required reading on Wall Street
GameStop stock surge hits fourth day Wednesday as hedge funds walk away
Andrew Willis: Why did BlackBerry’s stock triple despite absolutely nothing happening? Over-hyped Reddit posts
Avoid costly mistakes when it comes to your RRSP
We all make mistakes. And this time of year, people often commit blunders with their registered retirement savings plans. Tim Cestnick shares with you some things to watch for.
A veteran’s guide to strategically picking dividend stocks
Larry MacDonald checks in with Tom Connolly, a successful dividend growth investor and newsletter writer, to see how his income strategy held up during last year’s market volatility - and provides an update on his stock holdings.
Bucking up an investor in despair about his lame utility stock
Markets are so, er, buoyant right now that stocks just poking along look like complete losers. Take the blue-chip, dividend-growth stalwart Fortis Inc., for example. “Fortis stock has done absolutely terribly recently,” a reader recently sent us. “Have I missed something? What has changed?” Rob Carrick responds.
Book value bargains in the TSX to help power your portfolio
Value investors pay attention to book value when hunting for interesting stocks. To see why, it’s useful to remember that book value basically represents the difference between a company’s assets and its liabilities. If you could sell off a firm’s assets and pay off its debts (for the amounts stated on its balance sheet), you’d be left with a sum of money equal to its book value. But most investors recently have stopped favouring low-P/B stocks. And that’s exactly why it’s a good time to check in on them. Norman Rothery takes a look at current P/Bs ratios for the large Canadian stocks in the S&P/TSX 60 Index and just how much many have fallen below their 10-year averages.
Expected returns for the 26 financial stocks in the S&P/TSX composite index
Over the next few weeks, our equities analyst Jennifer Dowty will be providing readers with a list of companies in the S&P/TSX composite index grouped by sector and ranked according to their expected price returns by analysts. In this first instalment, she looks at the financials sector.
Horizons applies to launch Canada’s first bitcoin ETF for retail investors
Horizons ETFs Management (Canada) Inc. is the latest investment company to file a preliminary prospectus with the Ontario Securities Commission to launch a bitcoin ETF – a fund that would trade on the Toronto Stock Exchange under the symbol HBIT and track the price of bitcoin. Clare O’Hara reports.
Also see: Investors poured money into ETFs in 2020 for third consecutive year
Others (for subscribers)
Wednesday’s analyst upgrades and downgrades
Tuesday’s analyst upgrades and downgrades
Number Cruncher: Eight profitable North American stocks with tempting valuations
Who owns stocks? Explaining the rise in inequality during the pandemic
BlackRock’s shift to ‘net-zero’ investments is accelerating, CEO Larry Fink says
Gold’s rally to slow, not stop, as global economy recovers: poll
Globe Advisor
Keep an eye on these stocks ahead of a return to normalcy
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Ask Globe Investor
Question: I’d like some ideas on how to get in on the gaming issue. There are game producers and then of course the infrastructure folks, particularly chip makers who are so busy on gaming that they are shorting auto manufacturers. ETFs would be interesting. – David C.
Answer: If you’re looking for a Canadian ETF, there is only one that I know of in this sector. It’s the Evolve E-Gaming Index ETF, which trades on the TSX under the symbol HERO. It’s a new fund, launched in June 2019, so we don’t have much history to work with. But what we have is impressive; the fund gained 68 per cent over the year to Jan. 19.
This is a broadly-based international portfolio with 77 positions in a wide range of countries. The U.S. and Japan each account for about a quarter of the assets, with China at about 19 per cent and Singapore at 11 per cent. Top holdings include Sea Ltd., Activision Blizzard, Nintendo, NetEase, and Electronic Arts.
If you want to look at the U.S. market, consider Wedbush ETFMG Video Game Tech ETF (NYSE: GAMR), currently trading at around US$87. This was the first ETF to target the video game industry. We recommended it in my Internet Wealth Builder newsletter in November 2017, and it has just about doubled in value since.
Like HERO, this is a global ETF. U.S. stocks comprise 28.9 per cent of the portfolio, developed Asia has 23.4 per cent, and Japan has 16.5 per cent. Top holdings are Gamestop Corp., Bilibili Inc., Zynga Inc., and Activision Blizzard.
--Gordon Pape
What’s up in the days ahead
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Compiled by Globe Investor Staff