Stock picking

5 actions to invest in the circular economy (Goldman Sachs)

Goldman Sachs has identified 5 stocks to invest in the circular economy, a market that could be worth 4.1 trillion euros between now and 2030.
With the constant increase in raw material prices, circularity emerges as a promising solution to improve the efficiency, according to the consultancy firm Accenture.
This transition to more sustainable practices not only has environmental benefits, but could also generate as many as 6 million jobs worldwide.
Faced with this favorable outlook, Goldman Sachs has identified 5 key stocks closely linked to the topic of the circular economy.
These represent potential investment opportunities, offering investors the chance to make the most of the growing trend towards a more circular and sustainable economy.
1) Dassault Systemes Dassault Systemes is a French software company.
A leader in sustainable innovation and the design of virtual universes based on the 3DEXPERIENCE platform, this is a Goldman Sachs favorite and considered a digital enabler for the circular economy.
Thanks to its “Sustainable Innovation Intelligence” solution, fully integrated into the 3DExperience platform, companies are able to independently evaluate the life cycle of products, materials and processes.
This minimizes the environmental impact and encourages the adoption of practices for a circular economy.
Analysts believe Dassault Systemes has a competitive advantage in introducing new products and services, with multi-year growth prospects stemming from its commitment to sustainability.
The bank has assigned a buy rating to the stock, with a 12-month price target of 57 euros, predicting a 37% increase in its value compared to the closing on November 14th.
2) SMC Corporation Another company that Goldman Sachs has identified as an integral part of the circular economy is SMC Corporation, a Japanese engineering company included in the Nikkei index.
The bank gave SMC Corporation a price target of 103,000 Japanese yen, predicting an upside of 35%.
According to analysts, the stock appears slightly undervalued compared to other global industrial automation companies and could therefore increase in value thanks to the efficiency of its products.
With an increasing focus on sustainability, demand for SMC Corporation's products is expected to grow, contributing to its success in the context of the circular economy.
3) Hitachi The Japanese electronics giant Hitachi (Nikkei) is considered by Goldman Sachs as one of the global stocks that could benefit from the circular economy.
Hitachi, with its diversified presence in key sectors, actively promotes sustainability through various initiatives.
Its presence on this list reflects Goldman Sachs' optimism about its ability to capitalize on the opportunities presented by a circularity-oriented economy.
According to Bruno Melles, managing director of Hitachi Energy's Transformers Business Unit, the company is already actively committed to applying sustainability principles to its transformers, to reduce the carbon impact of raw materials and achieve full circularity through recycling at end of operational life.
The financial report published at the end of October highlighted a solid return in the second quarter of 2023, opening up interesting prospects for investors interested in the circular economy.
With a 13% increase in revenue compared to the previous year, to 2,096.5 billion yen, and an expected ROIC of 8%, Hitachi is in a prime position to capitalize on this trend.
Key sectors such as Digital Systems & Services, Green Energy & Mobility, and Connective Industries show significant growth, with orders rising sharply, especially in Green Energy & Mobility (+42%).
The continuous commitment to digital transformation, highlighted by the success of GlobalLogic (+22% in revenues), contributes to consolidating Hitachi's presence in the global market.
Furthermore, the focus on Lumada Business, with forecasts of 18% growth in revenues, indicates a strong push towards advanced technological solutions.
4) Philips The Dutch giant Philips is another protagonist in Goldman Sachs' list for investments in the circular economy.
Philips, known for its diversified business in electronics, lighting and medical devices, is strategically positioned to contribute to the sustainability goal through its commitment to environmentally sustainable business practices.
For all these reasons, the bank highlighted Philips as an attractive investment opportunity within the circular economy.
Philips is facing significant challenges following a 2021 respiratory device recall and dissatisfaction expressed by the US Food and Drug Administration (FDA).
However, the recent acquisition of 15% by Exor could represent an opportunity for Philips to recover, bringing new resources and skills into the medical sector.
Philips will need to demonstrate continued commitment to the safety and quality of its products to regain market trust and overcome current difficulties.
With reference to the circular economy, Philips' strategy can be summarized as follows: "use less, use longer, use again".
5) Republic Services Finally, the US waste management company Republic Services (NYSE) completes Goldman Sachs' list.
Its presence on the list highlights the importance of sustainable waste management in the circular economy.
The company stands out for its earnings growth, with expected EPS growth of 10.2% this year, outpacing the industry average.
Additionally, cash flow growth of 15.6% is above the industry average, allowing Republic Services to expand without depending on costly external financing.
Upward revisions to earnings estimates indicate a positive trend, reflecting a strong correlation with near-term stock price movements.
Republic Services could prove to be a potential outperformer, offering investors a solid and sustainable opportunity in a rapidly growing market.
read also European shares 2024, there is optimism and Goldman Sachs explains why DISCLAIMER The information and considerations contained in this article should not be used as the sole or main support on which to make investment decisions.
The reader maintains full freedom in his own investment choices and full responsibility in making them, since he alone knows his risk propensity and his time horizon.
The information contained in the article is provided for informational purposes only and its disclosure does not constitute and should not be considered an offer or solicitation to public savings.

Author: Hermes A.I.

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