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Stock Picks to Buy, Best ESG Value Investments: Lori Calvasina, RBC Business Insider

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Impact Investing Forum 2022

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The New York Stock Exchange on Nov. 20, 2018.
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RBC’s Lori Calvasina and Sara Mahaffy say socially conscious funds now hold $1 trillion in assets.
A rotation to value stocks started in late 2020 and has been in overdrive in recent weeks.
The RBC team brought those threads together with a group of popular ESG value stocks.

The sell-off in tech stocks and the sudden rise of value stocks has grabbed investors’ attention, but it doesn’t have to take precedence over everything else.

RBC experts Sara Mahaffy, an equity strategist, and Lori Calvasina, the firm’s head of US equity strategy, track the way socially conscious investors and funds are investing their money. They also keep an eye on these companies’ behavior and the news coverage they’re attracting.

Over the last couple of years socially responsible investing has shed its feel-good rep to become a major force on Wall Street, and one that companies have to take into account. Mahaffy and Calvasina say there is now $1 trillion invested in sustainable funds.

Their work can help investors keep track of what ESG funds and their leaders are doing, and keep up with market sentiment and important trends. But these days they’re also applying a value-oriented approach because of investors’ overwhelming interest in that theme.

Companies that are expected to bring in above-average profit or revenue growth have been favorites on Wall Street for more than a decade, in part because economic growth was so sluggish in the wake of the Great Recession . That meant investors were more than willing to pay top dollar for growth wherever they could find it.

But that may have shifted for the long term — or so value investors hope. Traditional value stocks in industries like banking and energy started to perform better after the introduction of COVID vaccines, and their returns hit another level as investors became more focused on a stronger economy, greater inflation, and impending increases in interest rates.

All of that tends to be better for value — or at least it’s less favorable for growth.

So the RBC duo pulled together a list of stocks that they say are among the top 25% of the most popular companies in their industry among ESG-focused actively-managed and passive sustainable funds; that have “Outperform” ratings from RBC’s analysts; and that “currently rank in the top two quintiles on Bloomberg’s Value factor within their global universe.”

Those stocks can be found below, ranked from lowest to highest based on how much upside to their price targets RBC believes they have. These figures were calculated based on Tuesday’s closing prices.

15. Michelin

MichelinMarkets Insider

Ticker: MLFP

Sector: Consumer discretionary

Market cap: $31.3 billion

Target price: 143 euros

Upside to target: -6.4%

Source: RBC Capital Markets

14. PNC Financial Services

PNC Financial ServicesMarkets Insider

Ticker: PNC

Sector: Financials

Market cap: $94.0 billion

Target price: $220

Upside to target: +1.4%

Source: RBC Capital Markets

13. TotalEnergies

Markets Insider

Ticker: TTFNF

Sector: Energy

Market cap: $148.3 billion

Target price: 52 euros

Upside to target: +3.6%

Source: RBC Capital Markets

12. Regions Financial

Regions FinancialMarkets Insider

Ticker: RF

Sector: Financials

Market cap: $24.2 billion

Target price: $26

Upside to target: +4.8%

Source: RBC Capital Markets

11. PPG Industries

PPGMarkets Insider

Ticker: PPG

Sector: Materials

Market cap: $39.2 billion

Target price: $174

Upside to target: +6.1%

Source: RBC Capital Markets

10. BNP Paribas

BNP ParibasMarkets Insider

Ticker: BNP FP

Sector: Financials

Market cap: $264.8 million

Target price: 72 euros

Upside to target: +9.0%

Source: RBC Capital Markets

9. KeyCorp

KeyCorpMarkets Insider

Ticker: KEY

Sector: Financials

Market cap: $25.2 billion

Target price: $29

Upside to target: +9.0%

Source: RBC Capital Markets

8. Ball

BallMarkets Insider

Ticker: BLL

Sector: Materials

Market cap: $29.4 billion

Target price: $101

Upside to target: +12.7%

Source: RBC Capital Markets

7. BBVA

BBVAMarkets Insider

Ticker: BBVA SM

Sector: Financials

Market cap: $1.1 billion

Target price: $7.40

Upside to target: +12.8%

Source: RBC Capital Markets

6. Weyerhauser

WeyerhauserMarkets Insider

Ticker: WY

Sector: Real estate

Market cap: $30.7 billion

Target price: $45

Upside to target: +14.5%

Source: RBC Capital Markets

5. Baker Hughes

Baker HughesMarkets Insider

Ticker: BKR

Sector: Energy

Market cap: $23.9 billion

Target price: $31

Upside to target: +15.7%

Source: RBC Capital Markets

4. Vertex Pharmaceuticals

Vertex PharmaMarkets Insider

Ticker: VRTX

Sector: Healthcare

Market cap: $59.6 billion

Target price: $268

Upside to target: +16.0%

Source: RBC Capital Markets

3. Masco

MascoMarkets Insider

Ticker: MAS

Sector: Industrials

Market cap: $16.4 billion

Target price: $77

Upside to target: +16.8%

Source: RBC Capital Markets

2. Gilead Sciences

Gilead SciencesMarkets Insider

Ticker: GILD

Sector: Healthcare

Market cap: $90.1 billion

Target price: $87

Upside to target: +23.5%

Source: RBC Capital Markets

1. Cigna

CignaMarkets Insider

Ticker: CI

Sector: Healthcare

Market cap: $80.3 billion

Target price: $304

Upside to target: +26.6%

Source: RBC Capital Markets

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