In this article, we presented the top 10 ESG stocks Al Gore‘s $25 billion hedge fund is buying. Click to skip ahead and see Top 5 ESG Stocks Al Gore’s $25 Billion Hedge Fund Is Buying.
Former U.S. Vice President and Generation Investment Management co-founder Al Gore, 72, has outperformed the broader market trends despite its sustainable investing strategy, which he describes as “improving quality of life without borrowing from the future”.
Al Gore’s sustainability-focused hedge fund has been investing billions of dollars in ESG stocks in a fight against climate change. Former US vice president has won a Nobel Peace Prize for his climate change activism, while his book ‘Inconvenient Truth’ and documentary also bagged Oscars.
“When we started Generation our mission was to prove the business case that the full integration of sustainability into investments need not sacrifice returns. Everybody knows that the market is a wild and unruly beast, and you have to do the best you can. We’re very proud of what we’ve been able to do thus far, but we are not blind to the statistical realities of investing,” Al Gore said.
A sustainability-focused firm has generated massive returns in the last fourteen years. Generation Investment returned 12.14% per year in its first ten years of operations. Its returns stood around 17% from 2015 to 2017.
Fiscal 2018 was also a solid year for Generation Investment Management as its 13F portfolio’s value soared from $10.32 billion at the end of 2017 to $11.92 billion by the end of 2018. Moreover, the hedge fund saw massive increases in the value of its 13F portfolio in the last two years. The firm ended fiscal 2019 with a portfolio value of $15.64 billion while the market value of Al Gore’s 13F portfolio hovers above $19 billion at the end of the third quarter of 2020. You need to keep in mind that 13F portfolio lists the value of a hedge fund’s holdings in the securities of publicly traded US companies. Al Gore’s hedge fund is potentially investing in foreign stocks and securities which is why its assets under management (AUM) stands at $25 billion.
ESG stands for environmental, social, and governance. Some investors like Al Gore are seeking to invest in companies that manage their influence on the environment and society at large. Although Mr. Gore is among the pioneers of ESG investing, ESG stocks gained traction since the 2015 Paris Climate Agreement.
“Despite all the lockdowns that we’ve had this year, we’re still on track for a world that is going to be too warm to sustain life as we know it, according to climate science,” Linda-Eling Lee, who is the global head of research for MSCI’s ESG Research group said. “You’re going to see lots more investors really shifting capital towards less carbon-intensive assets.”
Lee also pointed to the performance of some of the top-rated ESG-based ETF’s including more than 22% gains from Vanguard’s ESG U.S. Stock ETF (ESGV), which is second-largest by assets.
While Al Gore’s reputation remains intact, the same can’t be said of the hedge fund industry as a whole, as its reputation has been tarnished in the last decade during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, 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 78 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that significantly underperformed the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 16. 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.
It’s worth considering to make an ESG based stock portfolio to make profits from investments along with contributing to environmental, social, and governance values. However, if you don’t have an idea about how to select stocks for sustainable investing, you can simply copy Al Gore’s hedge fund portfolio. Let’s start a countdown on the top 10 ESG stocks Al Gore’s hedge fund is buying:
10. The Cooper Companies, Inc. (NYSE:COO)
A medical device developer, the Cooper Companies (NYSE: COO) is the tenth-largest stock holding of Generation Investment Management, according to the latest filings. The sustainable investing themed hedge fund first initiated a position in a medical device developer during the second quarter of 2016.
The firm has raised its stake in Cooper Companies by 12% in the September quarter this year to 2.2 million shares. Shares of the Cooper Companies rose 157% in the past five years. The company does not offer dividends amid its strategy of reinvesting profits back into the business. Several other hedge funds are bullish on a medical device developer. According to Insider Monkey data, the Cooper Companies was in 34 hedge funds’ portfolios at the end of June while the previous all-time high was 31.
9. Palo Alto Networks, Inc. (NYSE: PANW)
The cybersecurity platform Palo Alto Networks, Inc. (NYSE: PANW) is one of the best ESG stocks to invest in according to A1 Gore. The hedge fund has slashed 5% of its stake in PANW in the third quarter. Despite that, the cybersecurity platform accounts for 4.09% of the portfolio valued at $770 million. Shares of Palo Alto Networks rallied more than 50% this year, extending the five years gains to almost 100%.
Palo Alto Networks Inc was in 59 hedge funds’ portfolios at the end of the third quarter of 2020 compared to the previous all-time high of 52. Here’s what RiverPark Advisors stated in the shareholders’ letter:
“Palo Alto is a leader in the large and growing $19 billion in IT infrastructure security market. The company benefits from two secular trends – the migration to the cloud and the transition to SaaS models. Formerly a hardware-based solutions company, PANW now also offers software solutions independent of its hardware, allowing customers to use them on internal cloud deployments as well as on the large public cloud providers like Amazon, Google, and Microsoft.”
8. Henry Schein, Inc. (NASDAQ: HSIC)
The medical equipment provider Henry Schein (NASDAQ: HSIC) is one of A1 Gore’s favorite ESG stocks. The sustainable investing fund manager first initiated a position in Henry Schein’s early this year and the firm added to its existing stake in the third quarter. It is the eighth largest stock holding of Generation Investment Management’s equity stock portfolio.
Shares of Henry Schein underperformed this year due to pandemic related problems. Its internal sales grew 13% year over year in the September quarter.
7. Alphabet, Inc. (NASDAQ: GOOG)
The online media stock Alphabet, Inc. (NASDAQ: GOOG) is the seventh-largest stock holding of Al Gore’s sustainable investing portfolio. It first initiated a position in Alphabet in 2018. The firm, however, sold 39% of its stake in the latest quarter to capitalize on share price gains. Shares of Google soared 134% in the past five years.
“Considering solid Fund inflows, we added to long-term holding Alphabet Inc. to maintain its weighting in the portfolio. Alphabet is the parent company of Google, the world’s largest search and online advertising company. We increased our position in Alphabet this quarter as a protracted COVID-19-related recovery in travel and brand advertising presented an attractive buying opportunity. We are encouraged by improving trends in both search and YouTube, driven by durable tailwinds to e-commerce and local advertising, as well as the continued shift of video advertising dollars away from linear television as consumers increasingly cut the cable TV cord.”
6. TE Connectivity Ltd. (NYSE: TEL)
The manufacturer of connectivity and sensor solutions TE Connectivity Ltd. (NYSE: TEL) is a long-running investment of Generation Investment Management. The firm has been holding TE Connectivity shares since 2018. It is the sixth-largest ESG stock Al Gore likes the most. The shares of TE Connectivity grew more than 20% in the last twelve months, extending the five years gains to almost 90%.
On top of share price gains, Al Gore’s stock portfolio has also been bagging big dividends from the connectivity and sensor solutions company. TE Connectivity has raised dividends in the past seven straight years.
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