Many under-the-radar stocks are key to a green energy transition, according to Goldman Sachs — and it expects them to take off in 2023. The Wall Street bank said investor focus on large renewable energy and energy efficiency stocks in previous years means that companies further down the supply chain have been overlooked. “There is growing recognition that ESG [environmental, social and governance] fund assets are highly concentrated in market-weight positions in market bellwethers and overweight positions in obvious thematic winners,” said Goldman Sachs analysts in a note to clients on Jan. 3. The decade-long trend is likely to reverse this year, the bank said, as focus turns to companies in sectors such as semiconductors, electricity transmission, and cybersecurity which “provide critical components” needed for a transition toward clean energy. “We have received positive feedback that investors will look for discovery value and broaden to other sectors important in the supply chain of achieving environmental/social goals,” the analysts added. Despite much talk of a transition away from burning highly polluting energy sources, the world’s fossil fuel dependency continues . However, Goldman said there was a “growing urgency to accomplish key Sustainable Development goals,” given the pressure on energy supplies following Russia’s invasion of Ukraine. As such, the bank identified the following buy-rated stocks in the Europe, Middle East, and Asia regions it expects to benefit: ASML Heavy engineering firms such as SSAB , Vinci , Siemens , and chip toolmaker ASML — which all appear on Goldman’s list — are expected to see their shares rise by more than 10% over the next year, according to the median average of analyst price targets compiled by FactSet. Shares of ASML are expected to rise the most by 29.3% to 700 euros ($742), the data shows. The stock has fallen by 23% over the past year and was trading at around 570 euros on Thursday. The company, which produces photolithography machines used to make chips, is key to the proliferation of electric vehicles as they’re dependent on a large number of semiconductors to operate. The US-traded Dutch company is also buy-rated by UBS and Bank of America. Both banks see the firm as the “most preferred” stock in the semiconductor sector for 2023.
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