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150.77
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Want a Green Portfolio? Buy These 3 ESG Growth Stocks

What is ESG? It stands for environmental, social, and governance, and it's a broad framework that helps companies track their impact beyond financial results. Organizations are typically shareholder-focused, but they face increasing pressure to operate for all stakeholders, including employees, customers, and the communities around them. It's a movement designed to create a more equitable society and to ensure corporations aren't having an irreversible negative impact on the environment. Adoption of ESG initiatives will likely only accelerate as time goes on, and that spells one thing for investors: opportunity. Tesla (NASDAQ: TSLA), Workiva (NYSE: WK), and Microsoft (NASDAQ: MSFT) are three ESG companies investors should buy for different reasons. Here's what they are. 1. Tesla: Driving green energy Some investors might consider Tesla to be a controversial ESG pick because it was booted out of the S&P 500 ESG Index earlier this year. But many indexes measure ESG differently and place more weight on some metrics than others. In this case, Tesla fell short based in part on a series of jarring accusations by its employees about working conditions at its factories and for the way the company handled investigations into deaths involving its driver-assistance technology. However, it's worth noting that Tesla is still part of other major ESG indexes, including the iShares ESG Aware MSCI USA ETF (NASDAQ: ESGD), where it's the fourth-largest holding. After all, Tesla has delivered electric vehicles to the mainstream consumer, which is a seismic green initiative. Beyond producing the most popular electric cars, Tesla is also driving the residential green revolution with its solar roof and Powerwall storage products. Its storage solution is in such high demand from consumers that the company can't produce them fast enough and has dedicated a new manufacturing facility to focus on them specifically. Between 2012 and 2021, Tesla's total solar panel deployments have generated more electricity than the company has consumed in all of its factories and by all of its vehicles. And in 2021 alone, Tesla's customers prevented the emission of 8.4 million metric tons of carbon dioxide. The company is also on a mission to run clean manufacturing processes, recycling the majority of its waste, and it can recycle 100% of any Tesla lithium battery that no longer serves a customer's needs. Additionally, Tesla uses less water per vehicle produced than almost any other carmaker in the world. Tesla now has the capacity to produce 2 million electric vehicles each year, and it plans to grow that to 20 million by 2030, so its positive impact on the environment will continue to scale. From a financial perspective, the company could generate over $84 billion in revenue during 2022, according to analysts' estimates, plus it's highly profitable. With a long-term focus, investors could do very well buying Tesla stock here. 2. Workiva: Creating an ESG reporting framework Workiva is very much an under-the-radar stock, but it shouldn't be. Not only is the company growing steadily, but it's playing an important role in over 5,300 organizations by aggregating their mountains of data. Companies often have remote or hybrid workforces in the digital age, which means tracking workflows across multiple cloud-based applications can be a difficult task. Workiva integrates with dozens of leading software providers so companies can pull data directly from the source and place it all neatly within a single platform for clear visibility. Then, the company provides hundreds of reporting templates whether managers need to report to their executive team, to the Securities and Exchange Commission (SEC), or even to their stakeholders on ESG metrics. Workiva is now intently focused on capturing the growing ESG reporting opportunity, which could exceed $5 billion in annual value by 2025. That's because, in some regions, like the United Kingdom, large organizations are already required by law to track and report on certain ESG metrics, and Workiva enables that whether they need to collate data on climate impacts, governance challenges, or even diversity. Put simply, Workiva is a tool most companies will need in their toolbox if they want to take ESG tracking seriously. The company estimates it will generate $536 million in revenue during 2022, so based on the ESG opportunity alone, there's plenty of room for growth. 3. Microsoft: Using its dominance for good Microsoft is a household name thanks to its Windows computer operating system and Office 365 digital document suite. But it's far more than that today, with an expansive presence in gaming, hardware, and even cloud computing services. Microsoft might be less known for its tireless efforts on the ESG front, yet it could be the best pick of this bunch. Microsoft stock is the second-largest holding in the S&P 500 ESG Index behind its key rival Apple (NASDAQ: AAPL), and it's shooting far beyond the typical carbon-neutral goal most companies are striving to achieve. Instead, Microsoft intends to be carbon-negative by 2030, which means it will effectively remove more carbon from the atmosphere than it emits through its vast business operations. By 2050, the company estimates it will have removed from the atmosphere all of the carbon it has emitted since its founding in 1975. Since 2020, the company has had an internal carbon tax in place of $15 per ton, which gets invested in furthering its sustainability efforts. By 2025, Microsoft will run its operations entirely on renewable energy from its campuses to its data centers. And by 2030, it will have electrified its entire fleet of vehicles used in day-to-day business. But Microsoft's technology might be its greatest asset in the climate fight. It has built a planetary computer containing petabytes of data accessible in the cloud, delivering the ultimate monitoring tool to climate scientists and conservationists. If all of that isn't enough, Microsoft wants to be a zero-waste and water-positive company by the end of this decade. It's achieving all of this while performing like a powerhouse financially, generating over $198 billion in revenue during fiscal 2022, which ended June 30. A combination of Tesla, Workiva, and Microsoft could make for a very green portfolio in the long run, both from an ESG standpoint and a financial standpoint, but Microsoft might be a notch above the rest. 10 stocks we like better than Tesla When our award-winning analyst team has a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.* They just revealed what they believe are the ten best stocks for investors to buy right now... and Tesla wasn't one of them! That's right -- they think these 10 stocks are even better buys. *Stock Advisor returns as of August 11, 2022 Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple, Microsoft, Tesla, and Workiva. The Motley Fool recommends the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy. The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. Today’s Big Picture Asia-Pacific equity indexes ended today’s session mixed. Hong Kong’s Hang Seng fell 0.67%, China’s Shanghai Composite ended the day essentially flat, down a mere 0.02% while Australia’s ASX All Ordinaries gained 0.50%, Taiwan’s TAIEX advanced 0.84%, and Japan’s Nikkei rose 1.14%. India’s markets are closed to mark the country’s Independence Day holiday and South Korean markets are closed today to mark that country’s Liberation Day. Interestingly, Liberation Day is celebrated in both South and North Korea. By mid-day trading, major European equity indices are up moderately, and U.S. futures point to a down open later this morning. Following the robust movement in equities over the last few weeks, as we start the new week off, they look to give back at least some of those gains. The surprise rate cut by the People’s Bank of China this morning raises fresh questions over the speed of the global economy, especially after July economic data for China missed expectations. Even though we have a sizable downshift in the number of companies reporting their quarterly earnings this week, we see a meaningful pivot toward retail companies, the majority of which were plagued with bloated inventories when they reported their prior quarter. Expectations are for margin and bottom line pain as they look to clear out those inventories in time to prepare for the important holiday shopping season. As these reports roll in, we’ll know how bad the pain is and whether consumers are biting. Data Download International Economy The People's Bank of China surprised by cutting its one-year lending facility rate by 10 basis points to 2.75% and cut the seven-day lending rate, the same amount to 2%. The move preceded weaker than expected July data for the country. China's July Industrial Production rose 3.8% YoY, below the expected 4.6%, and slightly lower than June’s 3.9% figure. Retail sales increased 2.7% YoY in July below the 5% forecast. Manufacturing hubs and popular tourist spots imposed lockdown measures in July after fresh outbreaks of the more transmissible Omicron variant were found. On Friday, China reported more than 2,000 local Covid-19 cases as infections in the southern Hainan island edged higher with mass testing and several lockdowns resulting. Japan’s preliminary GDP for 2Q 2022 came in at 2.2% YoY, better than the 0.1% reading for the prior quarter but below the expected 2.5% figure. On a QoQ basis, the preliminary reading was 0.5%, up from 0.0% in 1Q 2022 but again below the expected figure of 0.6%. Wholesale prices in Germany increased by 19.5% YoY in July of 2022 following the 21.2% gain the prior month. Compared with the previous month, wholesale prices fell 0.4% in July, the first decline since October 2020. Domestic Economy At 8:30 AM ET, we’ll get the NY Empire Manufacturing Index data for August and the headline reading is projected to fall to 5.5 from July’s 11.1 reading. AT 10 AM ET, the NAHB Housing Market Index for August will be published, and the consensus view has it unchanged MoM at 55. The U.S. House of Representatives voted 220 to 207 along party lines on Friday to pass the Inflation Reduction Act, paving the way for wide-ranging reforms in healthcare and clean energy. President Biden is expected to sign the bill into law. Data from AAA put the national average gas price at $3.959 over the weekend, but Goldman Sachs (GS) sees the price surging back to $5 by the end of the year with Brent crude returning to $130 a barrel as the market still needs to balance rising demand and tight supplies. Following last week’s inflation data, markets see a 50% chance the Fed will hike by 75 basis points in September and that rates will rise to around 3.50-3.75% by the end of the year. Meanwhile, the bond market continues to question if the Fed can deliver a soft landing, with the yield curve remaining deeply inverted. Markets Markets closed the week on a strong note with Friday seeing almost all sectors up over 1.00% and Consumer Discretionary names well over 2.00%. The Dow rose 1.37%, the S&P 500 advanced 1.73% and both the Nasdaq Composite and the Russell 2000 posted a 2.09% gain on the day. In reviewing top contributors to returns across the sectors, Apple (AAPL) and Microsoft (MSFT) combined to account for about 48% of Technology sector returns, while Tesla (TSLA) managed to do that all on its own for the Consumer Discretionary sector. Here’s how the major market indicators stack up year-to-date: Dow Jones Industrial Average: -7.09% S&P 500: -10.20% Nasdaq Composite: -16.60% Russell 2000: -10.19% Bitcoin (BTC-USD): -48.93% Ether (ETH-USD): -48.19% Stocks to Watch Before trading kicks off for U.S.-listed equities, Clear Secure (YOU), Li Auto (LI), Tufin Software (TUFN), and Weber (WEBR) will be among the companies issuing their latest quarterly results and guidance. Bloomberg reports Wells Fargo (WFC) is looking to shrink its once dominant mortgage business. Shares of PlayAGS (AGS) jumped in after-hours trading on Friday after confirming Inspired Entertainment (INSE) made a $10 per share offer for the slot machine maker. IPOs GigaCloud Technology (GCT) and Innovative Eyewear (LUCY) could price their respective IPOs this week. Readers looking to dig more into the upcoming IPO calendar should visit Nasdaq’s Latest & Upcoming IPOs page. After Today’s Market Close Fabrinet (FN), Global-E Online (GLBE), Navitas Semiconductor (NVTS), World Wrestling (WWE), and ZipRecruiter (ZIP) are expected to report their quarterly results after equities stop trading today. Those looking for more on which companies are reporting when, head on over to Nasdaq’s Earnings Calendar. On the Horizon Tuesday, August 16 UK: Employment Change, Average Hourly Earnings – June Germany: ZEW Current Conditions & Economic Sentiment – August Eurozone: ZEW Economic Sentiment – August US: Housing Starts & Building Permits – July US: Industrial Production & Capacity Utilization – July Wednesday, August 17 Japan: Core Machinery Orders – June Japan: Imports/Exports – July UK: CPI, PPI – July Eurozone: 2Q 2022 GDP US: Weekly MBA Mortgage Applications US: Retail Sales – July US: Business Inventories – June US: Weekly EIA Crude Oil Inventories US: Federal Reserve FOMC Meeting Minutes - July Thursday, August 18 Eurozone: CPI - July US: Weekly Initial & Continuing Jobless Claims US: Philadelphia Fed Index – August US: Existing Home Sales – July US: Weekly EIA Natural Gas Inventories Friday, August 19 Japan: CPI – July UK: Retail Sales – July Germany: PPI - July Thought for the Day “People who avoid failure also avoid success.” ~ Derrick Lewis Disclosures Tufin Software (TUFN) is a constituent of the Foxberry Tematica Research Cybersecurity & Data Privacy Index Tesla (TSLA), Li Auto (LI) are constituents of the Tematica BITA Cleaner Living Index Tesla (TSLA), Li Auto (LI) are constituents of the Tematica BITA Cleaner Living Sustainability Screened Index Apple (AAPL), Microsoft (MSFT) are constituents of the Tematica Research Thematic Dividend All-Stars Index The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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