ESG is 'as crowded as ever,' AllianceBernstein says, naming 'high conviction' stock ideas to play it

AllianceBernstein has revealed stock ideas with "high conviction" to play ESG. The global asset management company's analysts, led by Ann Larson, pointed out in a research note published on October 17 that crowding was a "risk that is often mispriced due to its difficulty being observed." The analysts added that crowding is a risk factor that is often mispriced because it's not easily observed. Analysts wrote that the extent of crowding differs by region. They noted, for example, that "best-in class" investments in environmental, corporate governance, and social issues are particularly crowded in North America, but have been declining in Europe. In Asia, analysts noted that "ESG metrics have not been crowded" and "sustainability is not as popular." Best-in-class investing involves choosing companies who are considered industry leaders when it comes to meeting ESG goals. Analysts claim that the technology sector is "the biggest driver" in terms of global and North American ESG fund crowding. To play this theme, here are some "high conviction stock ideas". AllianceBernstein's 'High Conviction' Stock Ideas like the German athletic apparel company Adidas because of its "best in class" ESG credentials. The stock has been given an outperform ranking and the price target is 200 euros ($211), representing a potential gain of 17% over its October 17 closing. Hexagon, a Swedish IT firm, also made the list of asset managers. Analysts said that the company was at an "inflection" point in its ESG metrics and cited improvements to governance and disclosure. The analysts gave the company an outperform ranking at a price of 151 Swedish Krona ($13.83), representing a 57% increase. The American fast food chain Chipotle Mexican Grill also received an outperform ranking and a $2,300 price target - a gain of approximately 26%.
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Analysts said that the company's fundamentals were "getting stronger" and added that the company was "well-positioned" to take advantage of the growing popularity of GLP-1 diet drugs. AllianceBernstein also sees Aramark, a U.S. company that provides customer service, as "undervalued". Analysts wrote that the company would benefit from "structural benefits," as ESG's role in catering contracts will increase. They also noted the "multiple years" of embedded growth and margin extension not reflected by the valuation. Asset manager makes an outperform recommendation on the stock, which is currently $33. This would give a 23% increase in value. Michael Bloom, a CNBC reporter, contributed to this article.