In this article, we will take a look at 10 cheap ESG stocks to buy now. If you want to see more cheap ESG stocks, go directly to 5 Cheap ESG Stocks to Buy Now.
ESG investing is investing in a way that considers environmental, social, and governance issues. The term is often interchangeably used with ‘sustainable investing’ or ‘socially responsible investing’.
In terms of the environmental issues, investors consider whether a company helps conserve and protect the natural environment. In terms of social issues, investors consider whether a company has good relationships with employees, customers, and communities. Finally in terms of the governance aspect, investors consider whether a company has standards for company leadership and offer risk controls.
ESG investing is a big trend on Wall Street.
According to PwC, “Asset managers globally are expected to increase their ESG-related assets under management (AuM) to US$33.9tn by 2026, from US$18.4tn in 2021. With a projected compound annual growth rate (CAGR) of 12.9%, ESG assets are on pace to constitute 21.5% of total global AuM in less than 5 years.”
2022
Given investors focus on areas that don’t necessarily generate the highest returns, ESG investing might not match the broader market return, especially if their fees are higher than the average.
Nevertheless, there are some ESG stocks that trade for attractive valuations given the market decline in 2022.
With the high inflation, the Federal Reserve has raised interest rates six times this year alone and many analysts think the U.S. central bank will increase rates even further.
As a result of the substantial interest rate increases, the broader market indexes have declined signficantly in 2022 and some stocks trade for relatively low valuations that make them cheap.
If economic data doesn’t meet expectations, there could still be more downside in the near to medium terms. Given the uncertainty, it could be a good idea for long term investors to own a well diversified portfolio of stocks across many different sectors.
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Methodology
For our list of 10 Cheap ESG Stocks to Buy Now, we took 10 stocks with a forward P/E of under 15 that were among Vanguard ESG U.S. Stock ETF (ESGV)’s top 33 holdings as of 11/8/2022 in terms of % of the fund.
Using the collective wisdom of hedge funds, we ranked the 10 based on the number of hedge funds in our database that owned shares of the same stock at the end of Q2 2022.
10 Cheap ESG Stocks to Buy Now
10. Verizon Communications Inc. (NYSE:VZ)
Forward P/E as of 11/8: 7.45
Number of Hedge Fund Holders: 58
Verizon Communications Inc. (NYSE:VZ) is a company dedicated to ESG initiatives. In its ESG 2021 report, Verizon Communications Inc. (NYSE:VZ) said it is working to achieve net zero emissions in its operations by 2035, including sourcing or generating renewable energy equivalent to half of the company’s annual electricity consumption by 2025. In 2021, Verizon Communications Inc. (NYSE:VZ) also made a multi-year pledge of $3 billion “to uplift vulnerable communities, help close the digital divide, and contribute to the achievement of the UN SDGs. As part of this we are providing 10 million youths with digital skills training, supporting 1 million small businesses with tech resources and tools and upskilling 500 thousand individuals with tech training, all by 2030.”
In terms of its stock, Verizon Communications Inc. (NYSE:VZ) has fallen 28% year to date as of 11/9 given the broader market weakness and the inflation.
Diamond Hill Capital Management commented on Verizon Communications Inc. (NYSE:VZ) in a Q2 2022 investor letter,
“Verizon Communications Inc. (NYSE:VZ), alongside other wireless providers, has been increasing plan prices to help offset inflation effects. We’ve also seen indications that the wireless industry is moving away from the aggressive promotional environment of the last 18 months. A lower level of industry promotional intensity should benefit Verizon’s share of quarterly net adds while allowing the company to continue to focus on migrating customers to higher priced unlimited plans.”
Alongside Bank of America Corporation (NYSE:BAC), JPMorgan Chase & Co. (NYSE:JPM), and Meta Platforms, Inc. (NASDAQ:META), Verizon Communications Inc. (NYSE:VZ) is a cheap ESG stock that’s owned by many hedge funds in our database at the end of Q2 2022.
9. Cisco Systems, Inc. (NASDAQ:CSCO)
Forward P/E as of 11/8: 11.73
Number of Hedge Fund Holders: 63
Cisco Systems, Inc. (NASDAQ:CSCO) has a goal to reach net zero across scope 1, 2, and 3 emissions by 2040. The company plans to achieve its goal by increasing the energy efficiency of its products and solutions, and to accelerate the use of renewable energy as well as invest in innovative carbon removal solutions. Cisco Systems, Inc. (NASDAQ:CSCO) also contributed $477 million in cash and in kind contributions to community programs in FY21. Cisco Systems, Inc. (NASDAQ:CSCO) shares are down around 30.5% year to date given the weaker market as of 11/9.
8. Broadcom Inc. (NASDAQ:AVGO)
Forward P/E as of 11/8: 11.9
Number of Hedge Fund Holders: 66
Broadcom Inc. (NASDAQ:AVGO)’s ESG initiatives include donating more than $1.2 million for COVID-19 relief in 2021 as well as launching the Diversity@Broadcom initiative to encourage a more diverse, equitable and inclusive community. The company is also trying to reduce data power consumption with its new data center products. According to Broadcom Inc. (NASDAQ:AVGO), data centers could potentially account for 13% of global power consumption by 2030, up from around 1% now. As of 11/9, Broadcom Inc. (NASDAQ:AVGO) shares are down 29.2% year to date given that the NASDAQ has fallen 34.6% year to date.
7. Bristol-Myers Squibb Company (NYSE:BMY)
Forward P/E as of 11/8: 10.06
Number of Hedge Fund Holders: 69
Bristol-Myers Squibb Company (NYSE:BMY) is an ESG leader as the company has committed to reducing its total energy use by 15% and to reduce water usage in all its facilities. Bristol-Myers Squibb Company (NYSE:BMY) also hopes to provide equal opportunities to its employees and is committed to supporting the U.N. principles on human rights. Bristol-Myers Squibb Company (NYSE:BMY) has rallied almost 29% year to date as of 11/9.
RGA Investment Advisors commented on Bristol-Myers Squibb Company (NYSE:BMY) in a Q3 2022 investor letter,
Bristol-Myers Squibb Company (NYSE:BMY), which we referenced above, boasts a double digit free cash flow yield that gets divided roughly equally between repurchases, a dividend and M&A in what is the best environment for acquisitions perhaps ever. In 2019, BMY acquired Celgene, who had one of the better corporate development programs in the industry. We view this as a great outlet for us as generalists considering a company like BMY should truly thrive with the ability to acquire outstanding assets and science at depressed valuations. We touched on the Turning Point acquisition above and we expect the company to be increasingly active in the M&A landscape. Importantly, Celgene also came to BMY with a phenomenal CAR-T platform. CAR-T is a cell therapy that activates the body’s immune system to target cancers. This will be a key growth vector alongside M&A in overcoming the company’s patent cliff.”
6. Pfizer Inc. (NYSE:PFE)
Forward P/E as of 11/8: 9.15
Number of Hedge Fund Holders: 70
Pfizer Inc. (NYSE:PFE) is a leading ESG company given it prioritizes the health and well-being of society and the environment in which the company operates. The company has also focused on climate change impact mitigation as well as the reduction of waste arising from its operations. As of 11/9, Pfizer Inc. (NYSE:PFE) shares are down 17.5% year to date given the broader market weakness.
Like Pfizer Inc. (NYSE:PFE), Bank of America Corporation (NYSE:BAC), JPMorgan Chase & Co. (NYSE:JPM), and Meta Platforms, Inc. (NASDAQ:META) are cheap ESG stocks that many hedge funds in our database owned at the end of Q2 2022.
Click to continue reading and see 5 Cheap ESG Stocks to Buy Now.
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Disclosure: None. 10 Cheap ESG Stocks to Buy Now is originally published on Insider Monkey.
