Charging Towards Change

For What It's Worth -

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Happy Thursday!

If you’re suddenly wary about attending an event or taking that trip, we feel you. We are still waiting for more details about the Omicron variant, but the message has been to exercise caution and get a booster.

Investors, too, are weighing the odds, causing the stock market to be very bumpy and volatile lately. Even the popular tech growth stocks that soared during the pandemic weren’t spared last week after the Fed spoke of tapering its economic stimulus measures due to rising inflation. (More on growth stocks below.)

That being said: if you’re just getting started as an investor, the best thing you can do is ignore all of this noise, kick back with some eggnog and stay invested. This great chart shows what you risk losing if you try to time the market and fail (which most people do).

So what can you do? It is a great time to learn more about the companies and funds you are invested in or considering for your portfolio. And FWIW is here to help. One wonderful resource in the news this week is the CDP, an international nonprofit that maintains a database of environmental disclosures from corporations and assigns them scores based on their transparency and performance. It released its annual “A list” of environmental leaders, highlighting 272 firms worth a collective $2 trillion that earned an “A” in one of their categories, and fourteen standouts that achieved a “triple A” score. The bad news: only 2% of the 12,000 companies included earned an “A” grade, and another 17,000 failed to provide any data. You can find the entire list here or look up the score of any company here.

What we've been thinking about ...

  • Making aviation history last week was a United Airlines passenger flight using 100% sustainable aviation fuel (SAF), and British Airways signing a multi-year SAF supply deal. High costs and low supply are still hurdles for SAF.
  • Women-first dating app Bumble may be dealing with weak user growth, but it has surpassed $1 billion global consumer spend—one of only 15 non-gaming apps to do so. FYI, women are in control at Bumble HQ, too: senior leadership is majority women and the CEO is the youngest self-made woman billionaire.
  • CNBC has partnered with our friends at JUST Capital to bring data on corporations’ treatment of stakeholders to a broader investing audience. (They hear you.)
  • Capital One just became the first major bank to end overdraft fees, which anti-poverty advocates say disproportionately impact low-income people.
  • And last but certainly not least, we’re beyond excited to share our Advisory Board with you! Check out their profiles — great people making important contributions to create a better world, and in some cases, helping to make sense of the rapidly growing ESG and impact investing movement.

Unpacking the EV battery pack

Cars and trucks are responsible for nearly one-fifth of carbon emissions in the US, and electric vehicles (EVs) represent the future that will replace them. Ironically, the first EVs were actually built around the same time as the first internal combustion vehicles. What caused them to disappear? Henry Ford’s mass-produced car and gasoline being readily and cheaply available across the country.

Over a century later, and with the climate crisis at our doors, they’re back, greatly owing to the technological advancements in one area: batteries. We now have cars that go 300 miles or more on a single charge, and average lithium-ion battery pack prices have fallen 89% since 2010. Another 25% price drop, and EVs will be sold at the same price as gasoline cars.

The shiny cars may get all the attention, but the battery economy, which also supports renewable energy storage systems and grids, is quite literally at the heart of the climate transition and offers opportunities for sustainable investors. Wall Street investment firm Morgan Stanley recently called batteries “the new oil,” and Goldman Sachs says we’re in the middle of a “Great Battery Race.” Investors can look at the entire battery supply chain for ideas or consider putting money in one of the several battery ETFs. Examples of some of the largest ones: Amplify Advanced Battery Metals and Material ETF (BATT) and Global X Lithium & Battery Tech ETF (LIT).

However, investors should be aware of the ethical and supply-related issues. The mining for required raw materials like lithium, cobalt, manganese, and nickel are linked to human rights abuses and environmental damage. There are also concerns about demand for these metals exceeding supply soon and pushing battery pack prices the wrong way — higher.

As EV makers try to improve their ESG ratings, avoid supply chain constraints, and have the most competitive product on the market, there’s great potential for disruption in the battery sector. We’re seeing new chemistries and next-generation technologies emerge. To avoid using cobalt, most of which is mined in the Democratic Republic of Congo where child labor is rife, some players are turning to lithium iron phosphate or LFP batteries. The world’s biggest battery maker is among those developing cheaper sodium-ion batteries. Solid-state battery companies like Solid Power and QuantumScape have raised money from Ford, BMW, and Volkswagen. There’s recycling of lithium-ion batteries for raw materials, and some miners are looking for reserves in countries with more stability and human rights protections.

Charging towards change: we love to see it.

Value vs growth

Say hello to the Mac vs. PC, Coca-Cola vs. Pepsi, and Batman vs. Superman of investing styles. You’ll often hear people on the news discuss one outperforming the other or investors moving from one to the other. If you scrunch your forehead and nod along sagely but are afraid to admit you don’t know what any of that means, we’re here to demystify.

Value stocks: If an investor believes a stock is available at a bargain because the market is undervaluing it and pricing it too low, they see it as a value stock. Determining a company’s intrinsic worth may include fundamental and quantitative analysis — such as price-to-earnings ratios — and paying attention to economic cycles. Platforms like Fidelity and Vanguard often label the stocks, funds, and ETFs they offer as either growth or value-focused. In this case, you are looking for “value.” Sectors that generally contain value stocks are financials, materials, real estate, and energy. (Don’t confuse this with values-based investing, where investors make sure their portfolio aligns with their principles and beliefs.)

Growth stocks: These are companies with a lot of buzz, believed to be on the fast track, and positioned for dramatic growth. They may include major tech giants like Apple, Google, and Amazon, or even a small biotech working on a new revolutionary product. These stocks can be expensive despite very little earnings at the company and are often volatile. If you’ve heard of a brand on the verge of “disrupting” an industry, it’s probably a growth stock. Sectors that tend to contain growth stocks are technology, health care, and communication services.

Depending on the economic climate, investors and traders tend to lean toward value or growth, causing short-term ebbs and flows. During times of uncertainty, recessions, and low interest rates, growth stocks tend to perform better than value stocks. When the economy is booming, value stocks start to gain speed. Overall, growth has had an impressive run since the 2009 financial crisis. Will the economic bounce back after the pandemic jolt value back to life? We’ll have to wait and see, but analysts point out that rising inflation may also contribute to a surge.

Regardless, most investors with a diversified portfolio will own a mix of growth and value stocks. The proportion depends on factors like your age and investing goals. For example, when you’re young and have many years of investing ahead of you, you can seek higher returns with high-growth stocks and take the risks that come with them — something you can’t do when you’re nearing retirement.

Before you go -

The child-care crisis and other pandemic issues kept moms with young kids out of the workforce longer than other groups but they’re returning slowly.