Kamis, 20 Februari 2020

Claim Your Share Of The "Smartest Acquisition In The History Of Business"

Investing Daily
Despite concerns over the coronavirus outbreak, the stock market continues...

Claim Your Share Of The "Smartest Acquisition In The History Of Business"

An ignored satellite company just closed a genius-level deal that could generate a massive 38,362% return in year one. Because Wall Street analysts overlooked a critical contract detail, you have a golden opportunity to load up on stock at a discount and pocket a quick $201,873. But only if you take these exact steps today… Click here for detailed instructions.

ESG Investing: Doing Well, By Doing Good
By Jim Pearce

Despite concerns over the coronavirus outbreak, the stock market continues to move higher. Fueling optimism is stronger than expected quarterly results from many industry leaders. Apple (NSDQ: AAPL), the world's valuable public company, reported record results for revenue and earnings despite the ongoing trade war with China.

However, investors may be underestimating the impact the virus could have on future quarterly earnings results. China's economy is second in size only to that of the United States. Already, some analysts are predicting a drop of at least 1% in China's gross domestic product (GDP) this year due to the virus.

Read This Story: Pathogens and Profits: Coronavirus Takes Its Toll

If those predictions prove true, a stock market correction is likely. When that happens, some companies will suffer more than others. A corporate CEO doesn't want to give shareholders an excuse to dump his company's stock, instead of dumping his competitor's. For that reason, many companies are going out of their way to embrace an old idea that is rapidly gaining new credence on Wall Street.

Socially Responsible

It wasn't that long ago that the concept of "socially responsible investing" was viewed by Wall Street as an inefficient means of building wealth. The industries excluded included alcohol, tobacco, and firearms, some of the most profitable businesses during the second half of the twentieth century. Many portfolio managers regarded socially responsible investing as akin to fighting with one arm tied behind their backs and rejected it for that reason.

Over time, socially responsible investing evolved to be known as ESG, which stands for environmental, social, and governance. Instead of excluding specific industries or sectors, it focuses on policy objectives such as reducing air and water pollution, promoting equal employment, and mandating ethical business practices. Rather than aiming at harmful products, the ESG movement is an attempt to modify harmful behaviors across all sectors of the economy.

Until recently, most companies only paid lip service to ESG objectives since their shareholders and board members were primarily interested in maximizing their return on investment. But over the past few months, ESG has moved to the forefront of shareholder interests and is rapidly being adopted by companies in all industries.

As Good as Gold

In January, BlackRock (NYSE: BLK) CEO Larry Fink identified climate change in a letter to shareholders as a priority for his fund managers that collectively control over $7 trillion of assets. Fink's message is clear: ESG is an important consideration that weighs heavily in the valuation of all businesses. For that reason, companies in sectors not traditionally associated with socially responsible investing are addressing it head-on.

On February 12, Canadian miner Barrick Gold (NYSE: GOLD) released Q4 and full-year results that included this statement from the company's CEO:

How Coca-Cola Turned $40 Into $16.1 Million

Talk about a fantastic long-term investment... Coke went public at $40 a share. Now one of those original shares is worth $16.1 million. Now... I can't tell you what the next Coca-Cola is going to be. But I CAN tell you where you'll find it... It's in this small corner of Wall Street populated by companies that are absolutely ruthless about doing one specific thing. This is hard to believe. But it's all documented here.

"At Barrick, ESG is not some box-ticking compliance function but a core strategy. It starts at the top and permeates through the entire organization, and we believe that if it is managed well, it will drive our ability to deliver long-term profitability. It's not only a social imperative, it's a commercial one."

Read This Story: Gold: Shelter From The Storm

A cement maker may be among the last companies you'd expect to extol the virtues of their impact on the environment, but CEMEX (NYSE: CX) is jumping aboard the ESG bandwagon, too. In its Q4 and full-year results released on February 12, the company included this statement from company CEP Fernando Gonzalez:

"Climate change has been a priority for CEMEX for many years. Our efforts have brought significant progress to date, but we need to do more. This is why we have defined a more ambitious target for CO2 emissions by 2030: a reduction of 35% to ensure alignment with the Paris Agreement commitments. In addition, we are now establishing an ambition to deliver net-zero CO2 concrete by 2050. We will publish a detailed position paper on climate action on February 18."

What's Your ESG Rating?

I'm not convinced that Barrick's ESG efforts really matter all that much to investors. All of the stock's 60% gain during the past year took place during a ninety-day span (May 30 - August 28) in 2019 while the price of gold was climbing from below $1,300 per ounce to more than $1,500. Since then, the price of gold has remained flat as has Barrick's share price.

But the fact that the company felt compelled to emphasize its ESG efforts is telling. Sooner or later, the stock market will start feeling the pinch from the coronavirus outbreak. And when it does, companies without an ESG strategy may find themselves on the outside looking in.

Already, MSCI Research rates companies based on their compliance with ESG objectives. For example, CEMEX has an ESG score of BBB, which is an "average" rating since it is considered neither a laggard nor a leader in any of the rated categories. Unsurprisingly, electric vehicle maker Tesla (NSDQ: TSLA) has a rating of A, only one notch above CEMEX.

As companies more fully understand how the ESG ratings are calculated, they will be better able to respond to them. As scores improve, some companies will include their ESG rating as part of their regular quarterly report alongside EPS (earnings per share).

It may be a while until a company's ESG rating has a direct impact on its share price. Until then, the tried and true methods for scoring big profits in the stock market will continue to hold sway. An expert in these methods is my colleague, Jimmy Butts.

Jimmy Butts is chief investment strategist of the premium trading service Top Stock Advisor. He's skilled at pinpointing hidden gems that possess intrinsic merits. These stocks are ignored by Wall Street but they eventually enrich early investors.

Getting in on the ground floor means you can buy these stocks at bargain prices and watch your stake soar before the rest of the investment herd catches on. For Jimmy's latest "contrarian" value plays, click here now.

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