In this article, we discuss the 10 cheap ESG stocks to invest in. If you want to skip our detailed analysis of these stocks, go directly to the 5 Cheap ESG Stocks To Invest In.
Institutional investors like hedge funds have started placing Environmental, Social, and Governance (ESG) metrics, usually collected from data on intangible assets within a specific business, at the center of their strategies as it becomes clearer that these “non-financial” factors play an increasingly important part in the overall operations of an enterprise. According to a report by news publication Bloomberg, ESG assets will likely rise above $53 trillion in value by 2025, comprising more than a third of the total $140 trillion in assets under management.
This is a conservative estimate since it assumes that ESG assets will grow at a 15% pace through this period, almost half the rate at which they have grown in the past five years. Although European firms are the industry leaders in this regard, Bloomberg estimates that American companies are incorporating ESG practices into the operations faster than their counterparts across the Atlantic and could soon overtake them. By the end of 2021, ESG assets are expected to be more than $37 trillion.
Investors who want to take advantage of this growth should explore ESG and impact investing closely. Some of the top ESG to buy right now include Flex Ltd. (NASDAQ:FLEX), eBay Inc. (NASDAQ:EBAY), and Hologic, Inc. (NASDAQ:HOLX), among others discussed in detail below. The ESG debt market and ESG ETFs are also set to soar in value over the next few years. Almost $1 trillion is expected to flow into ESG ETFs by 2025. The ESG debt market will likely rise to $11 trillion within the next three years, up from $2 trillion presently.
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Our Methodology
With this context in mind, here is our list of the 10 cheap ESG stocks to invest in. The ESG companies were identified based on the initiatives they have taken to become more responsible environmentally, socially, and in terms of their governance. Those that have a PE Ratio of less than 20 feature heavily on the list.
The hedge sentiment around each stock was gauged using the data of 873 hedge funds tracked by Insider Monkey.
Why pay attention to hedge fund holdings? Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 86 percentage points since March 2017. Between March 2017 and July 2021 our monthly newsletter’s stock picks returned 186.1%, vs. 100.1% for the SPY. Our stock picks outperformed the market by more than 86 percentage points (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
Cheap ESG Stocks To Invest In
10. Ternium S.A. (NYSE:TX)
Number of Hedge Fund Holders: 15
PE Ratio: 3.84
In August, Ternium S.A. (NYSE:TX) announced that it had entered into an agreement with Vale, a Brazilian mining company, to jointly focus on the development of technologies that will reduce carbon emissions during the manufacture of steel products. The company, based in Luxembourg, could also be affected by a new EU roadmap that plans on cutting carbon emissions on the continent by 55% within this decade.
Citi analyst Alexander Hacking recently reiterated a Buy rating on Ternium S.A. (NYSE:TX) stock and raised the price target to $60 from $50, noting the firm was a “preferred steel stock” based on growth and value metrics.
At the end of the second quarter of 2021, 15 hedge funds in the database of Insider Monkey held stakes worth $213 million in Ternium S.A. (NYSE:TX), up from 14 in the preceding quarter worth $203 million.
Just like Flex Ltd. (NASDAQ:FLEX), eBay Inc. (NASDAQ:EBAY), and Hologic, Inc. (NASDAQ:HOLX), Ternium S.A. (NYSE:TX) is one of the stocks that is attracting the attention of elite investors.
9. Kimco Realty Corporation (NYSE:KIM)
Number of Hedge Fund Holders: 20
PE Ratio: 24.89
In August, Truist analyst Ki Bin Kim had maintained a Buy rating on Kimco Realty Corporation (NYSE:KIM) stock and raised the price target to $25 from $23. Other advisors, like Barclays, are also positive on the shares. This is partly because inflationary tailwinds are expected to boost the earnings of real estate investment trusts in the coming weeks and months. The firm also recently announced a $500 million equity offering. The firm releases an annual corporate responsibility report that highlights the steps it has taken to meet five and ten-year ESG goals.
Kimco Realty Corporation (NYSE:KIM) has a stellar dividend record, like most real estate companies. On August 13, it declared a quarterly dividend of $0.17 per share, in line with previous. The forward yield was 3.1%.
Among the hedge funds being tracked by Insider Monkey, Boston-based investment firm Arrowstreet Capital is a leading shareholder in Kimco Realty Corporation (NYSE:KIM) with 2.6 million shares worth more than $54 million.
8. ArcelorMittal (NYSE:MT)
Number of Hedge Fund Holders: 22
PE Ratio: 5.62
ArcelorMittal (NYSE:MT) was recently forced to halt production at some steel plants in Europe because of the high energy prices. Even as a dramatic increase in iron ore prices benefits steel companies, rising energy prices have spoiled the party somewhat. As a result of this, ArcelorMittal has also raised the prices of some steel products. The company is one of the largest steel firms in the world with a market cap of over $31 billion. It has set a goal of reducing carbon emissions internally by 25% in line with international standards in this regard.
ArcelorMittal (NYSE:MT) has also stepped up efforts to reduce the carbon footprint of the company. In June, the company revealed that it had entered into an agreement with Canadian authorities to spend $1.4 billion on decarbonization tech at the Ontario plant of the firm.
At the end of the second quarter of 2021, 22 hedge funds in the database of Insider Monkey held stakes worth $1 billion in ArcelorMittal (NYSE:MT), up from 21 in the preceding quarter worth $709 million.
7. Asbury Automotive Group, Inc. (NYSE:ABG)
Number of Hedge Fund Holders: 26
PE Ratio: 7.91
Asbury Automotive Group, Inc. (NYSE:ABG) operates as an automotive retailer. It recently announced that it had acquired Larry H Miller Dealerships and Total Care Auto in a deal worth $3.2 billion. The purchase will add $5.7 billion in annual revenue for the buyer. The company recently beat market estimates on earnings per share and revenue in the third quarter by $1 and $300 million respectively. One of the biggest stakeholders in the firm is Impactive Capital, an ESG-focused hedge fund founded in 2018 that has quickly built a reputation for using capital as a tool for change. The fund is steadily improving the ESG score of Asbury Automotive Group.
On September 30, investment advisory Craig-Hallum maintained a Buy rating on Asbury Automotive Group, Inc. (NYSE:ABG) stock and raised the price target to $250 from $230. Ryan Sigdahl, an analyst at the firm, issued the ratings update.
At the end of the second quarter of 2021, 26 hedge funds in the database of Insider Monkey held stakes worth $821 million in Asbury Automotive Group, Inc. (NYSE:ABG), up from 20 in the previous quarter worth $903 million.
6. Owens Corning (NYSE:OC)
Number of Hedge Fund Holders: 34
PE Ratio: 9.90
Owens Corning (NYSE:OC) makes and sells a range of building products in the composites, insulation, and roofing domains. The firm is based in Ohio and was founded in 1938. It has an impressive dividend history and recently declared a quarterly dividend of $0.26 per share, in line with previous. The forward yield was 1.1%. The firm also recently beat market expectations on earnings per share and revenue in the third quarter by $0.07 and $40 million respectively. The company has topped the 100 Best Corporate Citizens List three years in a row, setting unprecedented governance and sustainability standards in the process.
Analysts are naturally bullish on Owens Corning (NYSE:OC) in the wake of these results. RBC Capital analyst Mike Dahl recently raised the price target on the stock to $97 from $94 but kept a Sector Perform rating, underlining that inflation may weigh on the margins for the firm in the near term.
Among the hedge funds being tracked by Insider Monkey, Chicago-based investment firm Citadel Investment Group is a leading shareholder in Owens Corning (NYSE:OC) with 1 million shares worth more than $104 million.
Along with Flex Ltd. (NASDAQ:FLEX), eBay Inc. (NASDAQ:EBAY), and Hologic, Inc. (NASDAQ:HOLX), Owens Corning (NYSE:OC) is one of the stocks that hedge funds are buying.
In its Q1 2021 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and Owens Corning (NYSE:OC) was one of them. Here is what the fund said:
“Roofer and insulator Owens Corning, also a ClearBridge holding, is helping make the building sector more sustainable. The company operates across 33 countries and has positive environmental impact primarily through its insulation business. In the EU, for example, buildings are responsible for 40% of energy consumption and 36% of GHG emissions. New buildings consume only half of the energy of those built over 20 years ago, according to the company. But as 85% of the buildings in the EU are older than 20 years, and 85%–95% of them are expected to still be standing in 2050, there is need for a massive renovation. Roughly 35 million buildings in the EU will need to be renovated by 2030, according to the company.
Properly insulated homes lower energy intensity and thus the overall carbon footprint of a home. According to Owens Corning, insulation intensity of new homes is on the rise, driven in part by state and municipal rules requiring certain levels of insulation, but also by consumer preference for reducing energy consumption and being greener in the home. The company is helping meet this demand with insulation products that are lighter weight yet deliver stronger performance than higher-weight/higher-density products. The insight that greater density does not necessarily mean better performance has allowed the company to reduce shipping weight and fuel.
Owens Corning’s roofing business also features shingles that use a highly reflective granule technology to reflect the sun, keep roofs cooler and lower air conditioning energy demand. Its composites business also counts wind turbines as a major end use, another positive for sustainability goals.
As part of its 2030 Sustainability Goals, Owens Corning is also looking to grow a circular economy model in which virgin raw materials, waste, energy and emissions are minimized through intelligent design, renewable and recycled input and energy-efficient production.”
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Disclosure. None. 10 Cheap ESG Stocks To Invest In is originally published on Insider Monkey.
