You can do well while you're doing good. Some companies set out to make the world a better place, and they also happen to have solidly profitable business models. Owning their stocks lets you sleep at night, both from a financial angle and in terms of the way the businesses influence the world we live in.
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Mind you, that combination is a somewhat rare find. We asked a few of your fellow investors at The Motley Fool for their best ideas in the field of responsible investing. Read on to see how they came up with renewable energy expert Brookfield Renewable Partners (NYSE: BEP), robotic surgery specialist Intuitive Surgical (NASDAQ: ISRG), and cell tower operator American Tower (NYSE: AMT).
Your portfolio and the planet will thank you
Matt DiLallo (Brookfield Renewable Partners): With climate change worries on the rise, the world is racing to increase its renewable energy generating capacity. That's fueling explosive growth not only in wind and solar installations but in other cleaner sources like hydroelectric. These trends all bode well for Brookfield Renewable Partners, which is one of the global leaders in hydro.
Currently, more than 85% of the power generated by Brookfield Renewable Partners is hydro, with the rest coming from wind and other renewable sources like solar, biomass, and thermal. Overall, the company operates 261 generating facilities around the world that have the capacity to produce 10,600 megawatts (MW) of power. That's enough to power the lives of more than 1 million people. In addition, it has an extensive development pipeline of hydro and wind projects, with nearly 7,000 MW in development, including 300 MW of projects either under construction or ready to build.
Those projects, when combined with the embedded upside of company's power purchase contracts, should generate steady earnings growth for investors over the long term. In management's view, Brookfield can organically increase funds from operations by a 5% to 9% annual rate over the long term, which should power a similar rise to the company's distribution to investors. Add to the fact that Brookfield Renewable Partners currently offers a top-notch high-yield dividend of 5.3%, and long-term investors have the potential to earn a double-digit total annual return from a company that's building a cleaner world.
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The future of surgery is here
Sean Williams (Intuitive Surgical): When most people think of stocks for a better tomorrow, so-called green companies probably come to mind, but for me, it's all about companies that are improving the lives of others. Robot-assisted surgical system developer Intuitive Surgical is doing just that.
There frankly are no other companies whose hold on the market is even close to Intuitive Surgical's. Through the end of 2016, it had more than 3,900 da Vinci surgical systems installed worldwide, while its competitors had only a fraction of that number installed, combined. These systems allow surgeons to perform soft-tissue surgeries with small incisions that lead to quicker healing times. Ultimately, the technology improves patient quality of life.
Intuitive Surgical has a number of ways it makes money in the process of helping surgeons and patients. First, it sells its da Vinci surgical systems for an average price of about $1.5 million. Despite the high price point, though, these systems are generally low margin since it costs a pretty penny for Intuitive Surgical to put them together. The real cash cow for Intuitive Surgical are the instruments it sells with each procedure, as well as the servicing revenue needed to keep these surgical systems running well. Considering the high initial cost of the da Vinci system, customer churn is exceptionally low, and hospitals remain customers for a very long time. Additionally, since instruments and services are high-margin revenue channels, as the company's base of installed systems grows, its margins will grow, too.
Intuitive Surgical has two new ways of making an impact on the surgical market in the years to come. First, it's looking to branch out of its current focus on urology and gynecology and into more general-surgery areas. The company probably has a good chance of improving its market share in thoracic and colorectal surgeries. The expected social benefit would be shorter patients' hospital stays due to the precision that these surgical systems can provide.
The company also recently introduced a lower-cost da Vinci system that it believes will be more attractive to developing and emerging markets. As it becomes more efficient in developing its technology, its global moat should grow.
Intuitive Surgical is nothing short of a game changer, in this Fool's opinion.
Network access for emerging nations
Anders Bylund (American Tower): I believe that a more connected world is a better place. That's why I'm drawn to companies that strive to improve the reach and quality of high-speed data networks around the world. Yes, I know that these businesses are hoping to make money by expanding their market reach to new nations and underserved rural areas. That's just how things get done, so I'm fine with this profit motive.
One of the best examples of this global-connection zeal is wireless tower owner and operator American Tower. Its company name notwithstanding, American Tower draws 45% of its quarterly revenue and 35% of operating profits from international markets. International sales represented just 30% of total sales two years ago, and management is making a push into the developing world.
In the last two years, American Tower added thousands of new tower sites in potential high-growth markets like Nigeria, Brazil, and Peru. The company's presence in India exploded from 13,900 to 58,100 sites over the same period. To put the Indian surge into perspective, American Tower operates just 39,800 sites in the U.S. market.
This is a rock-solid business and an industry leader in many emerging markets. It provides an essential service for its clients -- the wireless network operators can't expand without tower services -- and clients sign multiyear leases for access.
So American Tower makes a lot of money while also expanding network access to millions of underserved people around the world. I get to make money while also feeling like my investment is making the world a better place.
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Anders Bylund owns shares of American Tower and Intuitive Surgical. Matthew DiLallo owns shares of American Tower, Brookfield Renewable Energy Partners, and Intuitive Surgical and has the following options: long January 2018 $80 calls on American Tower and short October 2017 $120 calls on American Tower. Sean Williams has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends American Tower and Intuitive Surgical. The Motley Fool has the following options: short October 2017 $120 calls on American Tower and long January 2019 $80 calls on American Tower. The Motley Fool has a disclosure policy.