RBC's Top 2020 ESG Best Idea Stocks to Buy

Investing

Published: June 18, 2020 7:52 am

The stock market is an ever-evolving giant that over the years has taken on many new forms. Investors in the 1980s had no idea what a dot-com boom was going to be. Similarly, those investing in the 1990s and early 2000s had little idea of cloud computing or the Internet of Things.

Now, already two decades into the new century, one of the biggest new areas for investors are stocks that are in environmental, social and governance, or ESG, basket. While not a new technology or health care breakthrough, conscientious investors will look for companies that have the traits that more closely represent their personal aspirations.

ESG refers to the three central factors in measuring the sustainability and societal impact of an investment in a company or business. These criteria help investors better determine the future financial performance of companies (return and risk).

The analysts at RBC have released their top picks in the ESG arena. They noted this in the research report:

The 2020 Global ESG Best Ideas list consists of 39 Outperform rated Global equities in our coverage universe that also meet the criteria determined by the Sustainable Finance Group’s proprietary ESG framework. This framework incorporates ESG opportunities, risks and momentum factors using structured and unstructured data from three external data providers. This list was not constructed as a portfolio, but rather is a list of high-conviction names that also demonstrate ESG leadership.

We screened the list looking for the top well-known companies that offer investors solid investment opportunities, not just for 2020 but for years to come. Again, all are rated Outperform at RBC. It’s important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.

Colgate-Palmolive

This top dividend payer is also a very safe consumer staples play for investors. Colgate-Palmolive Co. (NYSE: CL) continues to deliver solid execution and is one of the best-positioned companies in its sector, given its strong brands in attractive categories, particularly oral care. Colgate is one of the most valuable brands in the world.

Over half of Colgate’s total revenues (52%) are derived in faster-growth emerging economies, and the company maintains leading or near-leading market shares across Brazil, Russia, India and China. While those have slowed over the last year, a pickup in growth could be coming, especially with a very weak dollar making products attractive overseas.

Colgate-Palmolive stock investors receive a 2.38% dividend. The RBC price target for the stock is $88, and the Wall Street consensus target is $74.92. Shares closed Wednesday’s trading at $73.81 apiece.

Gilead Sciences

This stock is trading a very reasonable 9.36 times estimated 2020 earnings and may have a coronavirus treatment. Gilead Sciences Inc. (NASDAQ: GILD) is a biopharmaceutical company that discovers, develops and commercializes therapies for the treatment of HIV/AIDS, liver disease, cancer and inflammation. The acquisition of Kite Pharmaceutical in 2017 allowed for entry into the CAR-T space, indicating a renewed focus in oncology.

The company’s products include Stribild, Complera/Eviplera, Atripla, Truvada, Viread, Emtriva, Tybost and Vitekta for the treatment of human immunodeficiency virus (HIV) infection in adults; and Harvoni, Sovaldi, Viread and Hepsera products for the treatment of liver disease.

The company’s remdesivir may prove to be a promising COVID-19 treatment, and the World Health Organization labeled it as “the most promising” antiviral during the early days of the outbreak. But its effectiveness won’t be known until a slate of clinical trials reads out and more comprehensive data is obtained.

Investors receive a 3.69% dividend. RBC has an $88 price target, while the consensus target is $80.58. Gilead Sciences stock closed at $73.76 on Wednesday.