4 Top Stocks for ESG Investors

Environmental, social, and governance (ESG) focused investing has increased exponentially due to growing climate change concerns and the rising demand for socially responsible business activity. According to a Morningstar report, sustainable funds’ total assets rose 19% to nearly $2 trillion in the first quarter, marking a record high for the fourth quarter in a row. Investor’s interest in sustainability-focused investing is evidenced by the Vanguard ESG U.S. Stock ETF’s (ESGV) 5.5% gains over the past three months.

Last month, S&P Dow Jones CEO Dan Drape asserted that  ESG-based investing is one of their biggest growth opportunities. Furthermore,  according to BlackRock, Inc.’s (BLK) head of iShares Americas, Armando Senra, ESG investments could become a $1 trillion category by 2030.

Given this backdrop, we think it could be wise to bet on shares of established companies Apple Inc. (AAPL), Microsoft Corporation (MSFT), Visa Inc. (V), and UnitedHealth Group Incorporated (UNH). These four companies have significant market dominance and are among ESGV’s top holdings.

Apple Inc. (AAPL)

One of the most popular tech companies, AAPL is known for its innovative products, which include the iPhone. In addition, the company offers various services, such as Apple Arcade, Apple Music, Apple News+ and Apple TV+. Also, it is ESGV’s top holding, with a 6.07% weighting.

AAPL introduced the much-awaited iPhone 13 Pro and iPhone 13 Pro Max this month. The latest iPhones have a much-advanced camera system and impressive battery life. They are  expected to be available from September 24 and are  likely to drive up its sales.

AAPL’s net sales increased 36.4% year-over-year to $81.43 billion for its fiscal third quarter, ended June 26, 2021. The company’s operating income grew 84.3% year-over-year to $24.13 billion, while its net income increased 93.2% year-over-year to $21.74 billion. Also, its EPS came in at $1.30, up 100% year-over-year.

For its fiscal year 2021, analysts expect AAPL’s EPS and revenue to increase 70.4% and 33.5%, respectively, year-over-year to $5.59 and $366.39 billion. In addition, it surpassed the Street’s EPS estimates in each of the trailing four quarters. The stock has gained 32.4% in price over the past year to close Friday’s trading session at $146.06.

AAPL’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.

Also, AAPL  has an A grade for Sentiment, and a B grade for Quality. We have also graded AAPL for Momentum, Growth, Value, and Stability. Click here to access all AAPL’s ratings. AAPL is ranked #21 of 46 stocks in the B-rated Technology - Hardware industry.

Microsoft Corporation (MSFT)

Tech giant MSFT develops, licenses, and supports software, services, devices, and solutions worldwide. Its offerings range from Microsoft Teams, Office 365 Security, and Compliance, to Xbox hardware and Xbox content and services in the gaming segment. It has a 5.98% weighting in ESGV.

In June, Morgan Stanley (MS) and MSFT created a strategic cloud partnership aimed at accelerating MS' digital transformation and shaping the future of innovation in the financial services industry. In addition to the cloud transformation, this partnership is expected to help MSFT broaden its product and services portfolio and create additional collaborative opportunities in the financial services industry focused on the modern workplace.

MSFT’s revenue increased 19% year-over-year to $46.20 billion for its  fiscal fourth quarter, ended June 30, 2021. The company’s operating income grew 42% year-over-year to $19.10 billion, while its net income came in at $16.50 billion, representing a 47% year-over-year increase. Also, its EPS was  $2.17, up 49% year-over-year.

Analysts expect MSFT’s EPS to be  $10.09 in its fiscal year 2023, representing a 14.7% year-over-year increase. In addition, it surpassed the consensus EPS estimates in each of the trailing four quarters. The company’s revenue is expected to increase 23.2% year-over-year to $44 billion for the quarter ending September 30, 2021. Over the past year, the stock gained 47.8% in price to close Friday’s trading session at $299.87.

MSFT’s POWR Ratings reflect solid prospects. The company has an overall rating of B, which translates to a Buy in our proprietary rating system. In addition, it has a B grade for Stability, Sentiment, and Quality.

Click here to see the additional POWR Ratings for MSFT (Growth, Momentum, and Value). MSFT is ranked #14 of 147 stocks in the Software – Application industry.

Click here to check out our Software Industry Report for 2021

Visa Inc. (V)

Payments technology company V facilitates digital payments among consumers, merchants, financial institutions, businesses, strategic partners, and government entities. It operates VisaNet, a transaction processing network that enables authorization, clearing, and settlement of payment transactions. This stock has 0.99% weighting in ESGV.

In July,  V signed a definitive agreement to acquire Currencycloud. The company’s Global Treasurer, Colleen Ostrowski, said, “With our acquisition of Currencycloud, we can support our clients and partners to further reduce the pain points of cross-border payments and develop great user experiences for their customers."

V’s net revenue increased 27% year-over-year to $6.10 billion for its fiscal third quarter, ended June 30, 2021. The company’s non-GAAP operating income grew 35% year-over-year to $4.08 billion, while its non-GAAP net income increased 39% year-over-year to $3.30 billion. Also, its non-GAAP EPS came in at $1.49, up 41% year-over-year.

For the current quarter, ending September 30, 2021, analysts expect V’s EPS and revenue to increase 37.5% and 27.6%, respectively, year-over-year to $1.54 and $6.51 billion. In addition, it surpassed the Street’s EPS estimates in each of the trailing four quarters. The stock has gained 8% in price over the past year to close Friday’s trading session at $221.75.

V’s POWR Ratings reflect this promising outlook. The stock has a B grade for Quality, Stability, and Momentum. Within the Consumer Financial Services industry, V is ranked #11 of 51 stocks. Click here to see the additional POWR Ratings for V (Value, Sentiment, and Growth).

UnitedHealth Group Incorporated (UNH)

UNH operates as a diversified health care company in the United States. It operates through four segments: UnitedHealthcare; OptumHealth; OptumInsight; and OptumRx. In addition, it offers Medicaid plans, health management services, advisory consulting arrangements, and pharmacy care services and programs, among others. This stock has a 1.02% weighting in ESGV.

On July 8, UNH introduced predictive analytics to help improve well-being, lower costs and drive engagement in clinical intervention programs by addressing social determinants of health for people in some employer-sponsored benefit plans. This service innovation could further increase the demand for UNH’s products and services in the coming months.

UNH’s revenue increased 9% year-over-year to $70.20 billion for the second quarter ended June 30, 2021. In addition, the company’s total assets grew 6.7% year-over-year to $210.29 million, while its Optum segment’s earnings from operations increased 31.8% year-over-year to $2.90 billion.

Analysts expect UNH’s EPS to come in at $4.35 for the quarter ending December 31, 2021, representing a 72.6% year-over-year increase. In addition, it surpassed the consensus EPS estimates in each of the trailing four quarters. The company’s revenue is expected to increase 10.4% year-over-year to $284 billion in its fiscal year 2021. Over the past year, the stock gained 37.8% to close Friday’s trading session at $420.16.

It’s no surprise that UNH has an overall A rating, which equates to a Strong Buy in our POWR Ratings system. In addition, the stock has an A grade for Stability, and a B grade for Quality.

Click here to see UNH’s rating for Growth, Value, Momentum, and Sentiment as well. In addition, UNH is ranked #2 of 11 stocks in the B-rated Medical - Health Insurance industry.

AAPL shares were trading at $142.52 per share on Monday afternoon, down $3.54 (-2.42%). Year-to-date, AAPL has gained 7.91%, versus a 16.49% rise in the benchmark S&P 500 index during the same period.

Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles.

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