Investing

RBC's Top 2020 ESG Best Idea Stocks to Buy

Lowe’s

This company has a low 6% of foreign sales, which has helped in a strong-dollar scenario. Lowe’s Companies Inc. (NYSE: LOW) is a leading home improvement retailer with more than 2,000 stores in North America. The company has tempered its new store opening plans and is focusing investments on technology and e-commerce capabilities, in addition to improving its retail store productivity.

Lowes offers products for maintenance, repair, remodeling and home decorating. It provides home improvement products under the categories of kitchens and appliances, lumber and building materials, tools and hardware, fashion fixtures, rough plumbing and electrical, lawn and garden, seasonal living, paint, home fashions, storage and cleaning, flooring, millwork, and outdoor power equipment. The company also offers installation services through independent contractors in various product categories.

The dividend yield is 1.62%. The $136 RBC price target is lower than the consensus target of $138.60. Lowe’s stock was last seen trading at $135.65, up almost 3% on Wednesday.

Microsoft

This top old-school software and cloud technology stock has been posting all-time highs and has a massive $133.8 billion sitting on the balance sheet. Microsoft Inc. (NASDAQ: MSFT) manufactures, licenses, and supports a wide range of software products. The company has transformed its business model from a component driven model (PC, server) to one driven by the need for cloud capacity. It is also considered one of the best companies to work for.

Many Wall Street analysts agree that Microsoft has become a clear number two in the public or hyper-scale cloud infrastructure market with Azure, which is the company’s cloud computing platform offerings, and which continues growing at triple-digit levels. Some have flagged Azure as the biggest rival to Amazon’s AWS service.

Some analysts maintain that Microsoft is discounting Azure for large enterprises, such that Azure may be cheaper than AWS for larger users. The cloud was big in the 2019 and early 2020 earnings reports, and it will remain a growing part of the software giant’s earnings profile.

Microsoft reported strong fiscal second-quarter results across the board, with Azure accelerating to an impressive 64% year-over-year growth rate from 63% last quarter. Total revenue growth was 15%, and management guided double-digit revenue growth and 2% of operating margin expansion in fiscal 2020.

The dividend yield is 1.05%. RBC has set its price target at $195. The consensus target is $200.75, and Microsoft stock closed at $194.24.

PepsiCo

This top consumer staples stock fits the bill for worried investors. PepsiCo Inc. (NYSE: PEP) operates as a food and beverage company worldwide. Its Frito-Lay North America segment offers Lay’s and Ruffles potato chips; Doritos, Tostitos and Santitas tortilla chips; and Cheetos cheese-flavored snacks, branded dips and Fritos corn chips.

The Quaker Foods North America segment provides Quaker oatmeal, grits, rice cakes, natural granola and oat squares, as well as the soon to be changed Aunt Jemima mixes and syrups, and Quaker Chewy granola bars, Cap’n Crunch cereal, Life cereal and Rice-A-Roni side dishes.

Pepsi’s North America Beverages segment offers beverage concentrates, fountain syrups and finished goods under the Pepsi, Gatorade, Mountain Dew, Diet Pepsi, Aquafina, Tropicana Pure Premium, Sierra Mist and Mug brands, as well as ready-to-drink tea and coffee, and juices. It is one of the companies that helped Americans survive the pandemic.

Holders of PepsiCo stock receive a 2.85% dividend. RBC’s $153 price objective is above both the $143.29 consensus target and the most recent close at $131.76.

Again, the ESG group represents a new attitude among investors about how companies should be run. While perhaps not as significant as artificial intelligence or self-driving electric vehicles, it speaks volumes about the evolution of investors and probably will dominate discussion and investment choices in the years to come.