Nuveen Winslow Large-Cap Growth ESG Fund (NVLIX) uses environmental, societal and governance factors to help pick stocks. The result? The portfolio's performance is red-hot, making it one of the best mutual funds.
That focus on ESG investing has also not kept the $904.1 million fund from investing in large-cap market favorites like Amazon (AMZN), Apple (AAPL) and Nvidia (NVDA). ESG is gaining steam with investors who think social responsibility is rising in importance.
The fund was up 23.55% for the year, going into Thursday. In contrast, the S&P 500 was up 5.76%. The big-cap bogey finally erased its coronavirus pandemic loss.
The fund's large-cap growth rivals tracked by Morningstar Direct averaged a gain of 19.37%.
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ESG Investing: Smooths Path Toward Best Mutual Funds Status
The ESG investing fund's year-to-date trouncing of the broad market benchmark keeps it on a path to repeat as an IBD Best Mutual Funds Awards winner next year.
The fund is a 2020 Awards winner, having topped the S&P 500 in calendar 2019 as well as over the three, five and 10 years ended Dec. 31 on an average-annual-return basis.
ESG Investing Is Embraced By Hot Stocks
What's the benefit of buying only top-notch growth stocks that have certain ESG characteristics? ESG traits typically go hand-in-hand with strong financials, manager Justin Kelly says. Figuring out how to implement sustainable policies is part of the process of figuring out how to run a company so its revenues and earnings grow, he says.
"We want companies that will grow long term," Kelly said. "Those companies are highly correlated with companies that have positive ESG factors. Those are really the companies making decisions that lead to longer-term success. And picking stocks for the longer term is what we're all about."
How Amazon Can Improve Its ESG Traits
Even mighty Amazon fits the fund's ESG investing approach. The e-commerce and cloud computing powerhouse was the fund's No. 2 holding with a weight of about 9% as of June 30. "Until a couple of years ago, Amazon was focused on long-term economic progress and less on stakeholder issues like decarbonization," Kelly said. Amazon'scarbon emissions spew from delivery planes and trucks as well as from power plants that keep its computer servers running.
"Now they (got) on board (regarding ESG issues) by listening to stakeholders like Winslow," Kelly said. "They can buy delivery vans that are electric. They can do good by investing in companies with sustainable practices."
But this fund would lose its clout in encouraging companies to embrace sustainable practices if its buys did not enable it to outperform. A fund that can threaten to pull, say, $1 billion out of a company has a louder bullhorn than one that can threaten to withdraw only, say, $1 million.
How Nvidia Helps Make This One Of The Best Mutual Funds
One such successful holding is Nvidia. The chipmaker is up 106% this year. Appeal for ESG investing is not all that makes this stock attractive, of course. Execution of business strategy also revs up revenue and earnings.
The company makes graphics processing units. GPUs perform fast math better than conventional central processing units, or CPUs. That makes them better for use in video games, computer graphics, autonomous driving, cryptocurrency mining, machine learning and artificial intelligence.
Burton says video games in particular are headed for explosive growth. "They'll see a lift in demand not only due to so many more people working from home, but as video games move to a cloud-hosted model," he said. Far more people can afford to access games through the web than by buying home consoles. "The number of users will increase maybe 10-fold," Burton said.
Another Nvidia asset is Cuda. That's a parallel computing platform and programming interface. Basically, if you want to build something that works faster because it uses Nvidia GPUs, you need access to Cuda.
PayPal Units That Can Fuel Growth
PayPal (PYPL) is another stock with appeal for this ESG investing fund. Shares are up 78% this year. That helps the fund in its drive to repeat as an IBD Best Mutual Funds Awards winner. "One reason we like PayPal is that it is the preferred payment mechanism for e-commerce, whose growth has exploded in the shelter-from-home environment," Burton said.
Even as states ease stay-at-home restrictions, e-commerce has continued to grow fast, Burton says.
Another reason the fund likes PayPal is that it owns Venmo. "They're the largest provider of peer-to-peer money transfers," Burton said. "It's especially popular in the younger demographic. And they're moving forward with ways to monetize that user base."
Also, PayPal recently acquired Honey Science. The company develops tools that make it easier for consumers to use digital shopping coupons. One such tool is a browser extension that makes it easier to find coupons.
"Honey can find coupons you may not know about," Burton said. "That builds user loyalty for merchants. Merchants give consumers a discount, but win you as a customer."
Follow Paul Katzeff on Twitter at @IBD_PKatzeff for tips about retirement planning and active mutual fund managers who consistently outperform the market.
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As a seasoned expert in the field of Environmental, Social, and Governance (ESG) investing, I bring a wealth of knowledge and experience to the table. With a demonstrated understanding of sustainable finance, ethical investment strategies, and the intersection of corporate responsibility and financial performance, I can provide valuable insights into the Nuveen Winslow Large-Cap Growth ESG Fund (NVLIX) and its impressive track record.
Firstly, it's crucial to note that the Nuveen Winslow Large-Cap Growth ESG Fund stands out for its commitment to incorporating environmental, societal, and governance factors into stock selection. This approach, commonly known as ESG investing, has gained significant traction among investors who recognize the growing importance of social responsibility in the financial world.
The evidence supporting the fund's success lies in its remarkable performance. As of the provided information, the fund has outperformed the S&P 500, a benchmark for the broader market, with a substantial year-to-date return of 23.55%. This outperformance is particularly noteworthy in comparison to its large-cap growth rivals, which, according to Morningstar Direct, averaged a gain of 19.37%.
Moreover, the Nuveen Winslow Large-Cap Growth ESG Fund has a history of excellence, having been recognized as an IBD Best Mutual Funds Awards winner in 2020. It not only surpassed the S&P 500 in the preceding calendar year but also demonstrated consistent outperformance over three, five, and ten years, ending on December 31. This consistent track record attests to the fund's ability to deliver competitive returns over the long term.
The fund manager, Justin Kelly, sheds light on the fund's investment philosophy, emphasizing the correlation between strong ESG factors and companies with robust financials. He articulates the importance of selecting companies with positive ESG characteristics for long-term success, aligning with the fund's overarching goal of identifying stocks that will grow over an extended period.
An interesting aspect of the Nuveen Winslow Large-Cap Growth ESG Fund's holdings is its inclusion of large-cap market favorites such as Amazon (AMZN), Apple (AAPL), and Nvidia (NVDA). Even mighty Amazon, despite historical focus on long-term economic progress over stakeholder issues, now aligns with ESG principles, showcasing the influence that ESG-focused funds can exert on corporate behavior.
Nvidia, one of the successful holdings of the fund, exemplifies how ESG investing isn't solely about ethical considerations but also involves assessing business strategy execution. Nvidia's prowess in graphics processing units (GPUs) for applications ranging from video games to artificial intelligence contributes to both its appeal and the fund's success.
Another notable holding, PayPal (PYPL), is lauded for being the preferred payment mechanism for e-commerce, an industry that has seen explosive growth, especially during the stay-at-home environment. The acquisition of Honey Science further enhances PayPal's position, allowing the fund to capitalize on the company's potential for sustained growth.
In summary, the Nuveen Winslow Large-Cap Growth ESG Fund's stellar performance, strategic stock selection, and commitment to ESG principles position it as a compelling option for investors seeking both financial returns and ethical considerations in their investment portfolios. This fund's success underscores the increasing relevance of ESG factors in shaping the landscape of mutual fund investing.