In this article, we will take a look at the 5 best ethical companies to invest in according to Reddit. To see more such companies, go directly to 13 Best Ethical Companies to Invest in According to Reddit.
5. Tesla, Inc. (NASDAQ:TSLA)
Number of Hedge Fund Holders: 91
While Tesla, Inc. (NASDAQ:TSLA)’s ESG rating has dropped over the past few months, the stock remains a popular choice of Redditors. The reason why Redditors believe Tesla, Inc. (NASDAQ:TSLA) is an ethical investing option is simple: the company is the leader in the EV space and is playing a key role in moving the world away from conventional engine cars that are the biggest polluters in the world.
Hedge funds are also bullish on Tesla, Inc. (NASDAQ:TSLA). As of the end of the fourth quarter of 2022, 91 hedge funds had stakes in Tesla, Inc. (NASDAQ:TSLA), up from 88 hedge funds in the previous quarter. The biggest hedge fund stakeholder of Tesla, Inc. (NASDAQ:TSLA) is Catherine D. Wood’s ARK Investment Management which owns a $1.1 billion stake in the company.
Polen Focus Growth Strategy made the following comment about Tesla, Inc. (NASDAQ:TSLA) in its Q1 2023 investor letter:
“The leading detractors to our relative performance were three companies we don’t own: NVIDIA, Apple, and Tesla, Inc. (NASDAQ:TSLA). In fact, not owning these three companies was a roughly 400-basis point headwind to our relative results versus the Russell 1000 Growth in the first quarter. We believe Tesla also has strong competitive advantages, at least on the auto side of the business, but we currently have some questions around the company’s leadership and the magnitude of its growth prospects.”
4. NVIDIA Corporation (NASDAQ:NVDA)
Number of Hedge Fund Holders: 106
We chose NVIDIA Corporation (NASDAQ:NVDA) for our list of the best ethical companies to invest in according to Reddit because the stock ranks higher in the portfolio of Vanguard ESG U.S. Stock ETF, one of the most favorite choices of ethical investors on Reddit. The ETF tracks the performance of the FTSE US All Cap Choice Index and excludes companies involved in questionable practices and business areas like adult entertainment, alcohol, tobacco, cannabis, gambling and nuclear weapons.
Overall, NVIDIA Corporation (NASDAQ:NVDA) has strong ESG ratings and the company has committed to decrease it carbon footprint significantly in the coming years.
Polen Global Growth Strategy made the following comment about NVIDIA Corporation (NASDAQ:NVDA) in its Q1 2023 investor letter:
“Not owning Apple and NVIDIA Corporation (NASDAQ:NVDA) detracted from our relative performance. With respect to Apple, we have not felt that the combination of growth available and the valuation made for one of our best ideas. Concerning NVIDIA, while there seems to be strong demand for data center chips, the valuation and lack of clarity around pace and magnitude of that growth has kept us at bay to date.”
3. Visa Inc. (NYSE:V)
Number of Hedge Fund Holders: 177
Visa Inc. (NYSE:V) makes it to our list of the best ethical companies to invest in according to Reddit because it is the top holding of the Global Sustainability Leaders ETF, which is a popular ethical investing option among Redditors. The ETF tracks the performance of an index that consists of large companies known as “Climate Leaders.” These companies have no direct or significant exposure to fossil fuels and they are not engaged in “activities deemed inconsistent with responsible investment considerations.”
Visa Inc. (NYSE:V) saw a jump in hedge fund sentiment during the fourth quarter, as 177 hedge funds tracked by Insider Monkey ended the period with Visa shares in their portfolios, up from 165 hedge funds in the previous quarter. The biggest hedge fund stakeholder of Visa Inc. (NYSE:V) is Chris Hohn’s TCI Fund Management which owns a $4.1 million stake in the company.
Polen Global Growth Strategy made the following comment about Visa Inc. (NYSE:V) in its Q1 2023 investor letter:
“We trimmed Mastercard and Visa Inc. (NYSE:V) to equal weights of the Portfolio. Mastercard and Visa operate as a duopoly in a large and growing market. Over the last 50 years, global personal consumer expenditures (PCE) has grown 7-9% annualized. We expect 4-5% long-term PCE growth going forward. Additionally, the shift from cash to credit continues unabated, with a total credit penetration of only approximately 50% globally.3 This shift provides Visa and Mastercard with another ~4-6% of growth. When combined with PCE, this gives both companies high-single-digit to low-double[1]digit revenue growth opportunities. This growth estimate is before accounting for growth amplifiers like the acceleration of e[1]commerce, the shift from offline to online, and additional services. Both companies enjoy extremely strong network effects that provide strong competitive advantages.
We have trimmed Visa and Mastercard because their combined weight grew to over 12% of the Global Growth Portfolio because of their recent performance and to fund our increase in Amazon’s position size. We added to both positions when their prices were depressed due to cross-border transactions deteriorating materially from the pandemic. Cross-border volumes came roaring back when travel corridors reopened, and although we are several quarters removed from the cross-border nadir, Visa still grew volumes >30% in 1Q23. Total cross-border volumes are now 132% of 2019 levels. At 4.5% each, both companies remain high conviction positions for Global Growth.”
2. Amazon.com, Inc. (NASDAQ:AMZN)
Number of Hedge Fund Holders: 240
Amazon.com, Inc. (NASDAQ:AMZN) is added in our list of the best ethical companies to invest in because it’s one of the biggest holdings of Vanguard FTSE Social Index Fund Institutional Shares (MUTF:VFTNX), which is recommended by Redditors for ethical investing. VFTNX aims to track the performance of the FTSE4Good US Select Index. The fund’s holdings are selected based on ESG criteria and excludes companies that are involved in adult entertainment, alcohol, tobacco, cannabis, gambling, chemical and biological weapons, cluster munitions, anti-personnel landmines and nuclear weapons.
While Amazon.com, Inc. (NASDAQ:AMZN)’s ESG scores are not as impressive as those of other major tech companies like Microsoft and Apple, the company lists several projects and achievements related to ESG on its website and frequently makes headlines with its major investments in the ESG space.
Polen Global Growth Strategy made the following comment about Amazon.com, Inc. (NASDAQ:AMZN) in its Q1 2023 investor letter:
“We raised our position in Amazon.com, Inc. (NASDAQ:AMZN). During 2022, Amazon’s business experienced revenue deceleration from pre-pandemic levels combined with higher expenses resulting from inflation pressures as well as costs in their fulfillment segment. The fulfillment costs were set in motion during the pandemic when demand overwhelmed their network. More recently, AWS – along with Azure and GCP – experienced a deceleration in growth as customers globally feel pressure to optimize their usage in this tough macroeconomic environment. We don’t expect this deceleration to persist for the long-term given the secular trend of companies transitioning to the cloud.
For long-term investors, we believe this combination provides an opportunity and that Amazon is now poised to re-accelerate revenue growth, of which we are already seeing signs, while expanding margins and free cash flow. With respect to margins, given the fast growth in AWS and advertising, the latter generating almost $40 Billion in sales and growing at greater than 30% recently, the resulting mix-shift could result in operating margins of 10% or higher over time. This level would represent a 5x increase over 2022 levels. In sum, we are capitalizing on what we believe is arguably one of the most competitively advantaged business in the world, which is growing well, poised to accelerate that growth and expand margins, and is trading at an attractive price.”
1. Microsoft Corporation (NASDAQ:MSFT)
Number of Hedge Fund Holders: 259
Microsoft Corporation (NASDAQ:MSFT) is one of the best ethical companies to invest in according to Reddit because the company is the biggest holding of iShares MSCI USA ESG Select ETF (NYSEARCA: SUSA), an ETF that is quite popular among ethical investors on Reddit discussion boards. Microsoft Corporation (NASDAQ:MSFT) was also mentioned as a standalone investment option for ethical investors by several Redditors.
Microsoft’s ESG scores are excellent and the company ranks higher on the Just Capital’s rankings, which grade companies based on the “issues that matter most in defining just business behavior today.”
Microsoft Corporation (NASDAQ:MSFT) is also the most popular stock among 943 elite hedge funds tracked by Insider Monkey as of the end of the fourth quarter of 2022. TCI Fund Management of Chris Hohn has a $5.3 billion stake in the company.
Polen Global Growth Strategy made the following comment about Microsoft Corporation (NASDAQ:MSFT) in its Q1 2023 investor letter:
“Microsoft Corporation (NASDAQ:MSFT)’s fundamentals have largely stayed intact despite the headwinds many technology companies are facing due to the macroeconomic environment. While growth has decelerated below our longer-term target (we expect low-double-digit revenue growth over the next 3-5 years), we believe the deceleration should prove to be ephemeral. Azure and Office Commercial remain bright spots, while Windows OEM has been and will continue to be a drag over the next few quarters. With respect to Azure, even at a decelerated rate, the business continues to grow well. After eight consecutive quarters of Azure’s top line growth being in the mid-to-high-40s range, over the last two quarters, growth has been 42% and 38%, respectively. Microsoft is a scaled business with multiple and interlocking competitive advantages, and we believe the company will compound at high rates for a long period of time.”
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