01. March 2021 | 09:48 CET
E.ON, Defense Metals, SAP - Outperform with strong sustainability companies!
Sustainable investments play an increasingly important, sometimes decisive role for asset managers and institutional asset management. The embedding of ESG (Environment, Social and Governance) criteria in the corporate philosophy of the "money multipliers" and in particular in the process of investing money serves to differentiate from the competition, to improve risk management, to open up new business areas and to act in anticipation of possible EU regulations. For listed companies, this means making themselves attractive to investors through a transparent and comprehensive ESG policy. Several examples show that investors can outperform the broad market with ESG stocks. We present three promising investments.
time to read: 3 minutes by Carsten Mainitz
"[...] In 2020, the die is finally cast in the automotive industry towards electromobility. [...]" Dirk Harbecke, Executive Chairman, RockTech Lithium Inc.
E.ON SE - Dividend hunter season is about to start
E.ON is a flagship candidate in terms of sustainability. No matter which research, system or rating one uses in ESG, the DAX group is almost always among the TOP 10. In the last 6 months, the stock has significantly underperformed the DAX and is 20 percentage points behind the benchmark. This extreme underperformance of the stock offers an excellent anti-cyclical investment opportunity.
Since the acquisition of Innogy from RWE and the sale of the renewable energy business to its competitor, RWE has become E.ON's largest shareholder with 15%. The expected synergies in the amount of EUR 600 to 800 million per year will take effect from 2022. E.ON's vision is to position itself as an operator of European energy networks and to provide modern customer solutions as an innovation driver of the energy transition in Europe. The topic of electromobility plays a vital role in this. Central to this are the challenges posed by the increasing interconnection of production and supply in local network structures.
On March 24, the EUR 22.3 billion Essen-based Group will publish its figures for the past fiscal year. In mid-May, shareholders can look forward to an attractive dividend. The payout will be determined at the Annual General Meeting on May 19. The dividend yield is likely to be above 5%, which should lead to buying by dividend hunters in the coming weeks. Analysts at Credit Suisse and Berenberg also see opportunities with the formulated price targets of EUR 10.30 and EUR 10.50, respectively, representing an upside potential of a good 20%.
DEFENSE METALS CORP - this will be a good year
The Canadian exploration Company focuses on the further development of the Wicheeda Rare Earth Project with a size of about 1,700 hectares in British Columbia. In February, the Company reported excellent results of hydrometric separation of material in the pilot plant. A preliminary feasibility study is planned before the end of the first half of 2021. A drilling program is also scheduled for the summer to upgrade further and increase the deposit size.
Rare earths are relevant to many industries. China's dominant market position generally leads to a desire for production outside the People's Republic, thus making supply chains more secure. Another aspect is sustainability, although, at first glance, there is a contradiction between ESG and supplying the defense industry with rare earths. Defense Metals intends to differentiate itself significantly with its future production by implementing ESG criteria in rare earth production.
The Company is still a tiny stock market player with a market capitalization of CAD 32 million. The quality of the project and the delivered results are excellent. In the coming weeks and months, there will be important news flow related to the project's advancement. The potential upcoming IPO of competitor USA Rare Earth at more than USD 1 billion should significantly boost the entire sector's sentiment. Defense Metals' stock is thus very promising for many reasons.
SAP SE - clear need to catch up
According to MSCI, the Walldorf-based Group is one of the most sustainable companies in Germany. Founded in 1972, the software company is now one of the largest players in the industry worldwide. Its stock market value is currently a remarkable EUR 125 billion.
SAP is the market leader for business software and serves customers in 25 industries worldwide, from small and medium-sized businesses to large corporations. SAP's solutions enable customers to quickly analyze data and implement machine learning and applications related to the Internet of Things.
The performance of SAP and DAX over the last 5 years is roughly on par. However, the gap has widened significantly in recent months, with SAP shares lagging the leading index by 32% over this period. Since the industry environment and the Group's growth prospects are positive, the stock should soon catch up again.