The Sustainable 6

The Sustainable 6

A selection we think reflects the variety, quality, and excellent sustainability positioning of all the companies we invest in for clients.

In most of our recent meetings with clients, conversations have jumped quickly to the Magnificent 7 (Mag7). This collection of companies has grown considerably faster than the rest of the index (MSCI ACWI) over the last 6 and 12 months1

We’re seeing incredible statistics about index concentration (the highest since 19292), the pace of market capitalisation growth (NVIDIA adding the equivalent of JP Morgan in January alone3), and comparisons between market capitalisations and the GDP of countries (Microsoft is larger than France4). Current market capitalisations – above $3 trillion for Microsoft, $2.8 trillion for Apple, $2 trillion for NVIDIA – seemed unfathomable three years ago. No wonder there’s so little talk about other investment opportunities.

As active, long-term fund managers, our job is to build portfolios of 40 to 50 companies we believe will deliver strong returns over a decade and longer. Every conversation with a client is an opportunity to talk about the outstanding companies we invest in around the world, outside of the Mag7, for the long-term. To help with these conversations, we thought it could be useful to showcase a selection of companies we’re referring to as the Sustainable 6. Since we run high-conviction portfolios, there are many different combinations of companies we could have chosen; this is just one selection we think reflects the variety, quality, and excellent sustainability positioning of all the companies we invest in for clients.

1. Fortinet

US listed - market capitalisation:  $55bn


With a $55bn market capitalisation, Fortinet seems a minnow in comparison to the mega-cap tech companies, yet operates as a deserving market share leader in network cybersecurity. Founded by cybersecurity tech engineering brothers Ken and Michael Xie, it has consistently taken market share over the past decade to become the second-largest operator, just behind Palo Alto. Cybersecurity is critical for personal and business safety, and the global cost of cybercrime is now c.$11 trillion5. Capitalising on these tailwinds, Fortinet has grown profits by 34% across the last two years. With net cash of almost $1.5bn on its balance sheet, we believe the company is well positioned to weather storms if the competitive environment hots up, or to reward shareholders by doing buybacks if performance continues to be as strong as it has been. Fortinet trades on a 3% yield of next year’s free cash flow.

2. Spectris

UK listed - market capitalisation: $4bn


Spectris has a market capitalisation of just $4bn yet is led by one of the highest quality management teams of any our portfolio companies. Over the past five years they have undertaken a reorganisation process that has created a more focused, leaner, higher-quality business, with a net cash balance sheet. Returns have improved, as have profit margins and free cash flows. Using its expertise in advanced measurement and controls, Spectris provides customers with data, insights and solutions that help make the world cleaner, healthier and more productive. Examples include assisting farmers to improve soil health and crop yields, and equipping renewable energy companies with monitoring equipment capable of detecting potential mechanical problems early enough to undertake remedial and maintenance work with minimal disruption. Spectris trades on 5.5% yield of next year’s free cash flow.

3.  Infineon Technologies

German listed - market capitalisation: $48bn


Leader in the field of power management semiconductors. The company was spun out of Siemens in 1999 and has established itself as the world’s go-to provider of chip design for energy efficient data centres and artificial intelligence, transport (for automotive power distribution in electric vehicles), smart homes and buildings, robotics, and power conversion for renewable energy. It has doubled sales in the past four years and grown free cash flows by 41% p.a. during that period. Infineon trades on 3% yield of next year’s free cash flow.

4. HDFC Bank 

Indian listed - market capitalisation: $132bn


The leading mortgage provider in the world’s largest democracy, with the largest, youngest, and best educated population of any country. The company was founded in 1977 by H.T. Parekh to provide banking services to the unbanked people of India. More recently, it has brought digital banking services to this large population, enabling it to generate a 2% return on assets across its 80 million customers6. Last year the bank grew deposits at 21% and loans at 17%6, and helped raise mortgage penetration to 11% of GDP at the end of 20227. The growth runway remains long: mortgage penetration in Australia, for example, was 115% of GDP in 20218. Digital transactions now account for 95% of HDFC’s total transaction volume6, underlining how much India has benefited as average GDP per person has surpassed US$2k. With an ROE (return on equity) of 17%, HDFC Bank trades on 2.5x price to book and is expected to grow book value 13% next year.

5.  Atlas Copco 

Swedish listed - market capitalisation: $81bn


With a 150-year history and a $81bn market capitalisation, Atlas Copco enables customers to achieve sustainable productivity solutions by providing them with industrial compressors, vacuums and assembly systems. Its technologies are used on every continent and in many sectors and industries, including renewable energy, manufacturing, materials processing, and healthcare. They are at the heart of the growing move towards cleaner industry and a circular economy. Around 65% of revenues come from equipment sales and around 35% from rental and aftermarket services9 which help improve the predictability and stability of cash flows. Atlas Copco has doubled sales in the past six years and trades on a 3.5% free cash flow yield.

6. Edwards Lifesciences

US listed - market capitalisation: $52bn


Edwards Lifesciences was founded by Miles Edwards in 1958 when he developed the world’s first artificial heart. Today it is a world leader in heart valves used to treat cardiovascular disease, the number one cause of death globally. Its products include tissue replacement heart valves and repair devices, as well as transcatheter heart valves for higher-risk patients. Edwards has a credo to improve quality of life around the world and a commitment to provide innovative solutions for people fighting cardiovascular disease. Both aspirations are reflected in consistently high levels of research and development (18% of sales in 2022)10. The company has $1bn of net cash, providing ample capital for ongoing research and development and scope to return cash to shareholders. It is expected to grow profits by 33% over the next two years. Edwards Lifesciences trades on a 3% yield of next year’s free cash flow.

While the Mag7 draw market attention like a black hole absorbing all matter around it, many stars shine brightly across the universe. While the Mag7 may provide strong returns going forward, history suggests they will not be the only companies to do so. Over 3, 5 and 10 years, Fortinet has generated a higher total return for investors than Microsoft, Amazon and Apple. Investors in Atlas Copco have received a total return higher than Amazon over 3 and 5 years. When we look back over a longer time frame, say 15 years, the total return generated by Infineon Technologies exceeds that of Microsoft and is just shy of Apple and Amazon. Over 20 years, Fortinet, HDFC Bank, Edwards Lifesciences and Atlas Copco have all rewarded investors with higher total returns than Microsoft. Shorter-term, all of the Sustainable 6 have returned more than Tesla over 3 years. NVIDIA? Well, at the moment it seems no company can match its meteoric rise, though gravity might eventually have the last word.  

We believe the sustainable development contributions of the Sustainable 6 are as impressive as their financial performance. Whether it be the 1.4m online attacks that Fortinet11 protect their customers from every minute, the 165,000 rural villages HDFC provides access to financial products to6, the more than 800,000 patients treated with Edwards’ lifesaving transcatheter therapies in 202212, or that Infineon estimates its products save 34 times the emissions they take to produce13, these companies are driving the solutions to the largest social and environmental challenges the world faces. 

We believe companies such as the Sustainable 6 – high-quality companies with sustainable development tailwinds, capable of compounding cash flow growth at reasonable valuations – are well positioned to deliver attractive returns for a long time to come.

Reference to specific securities (if any) is included for the purpose of illustration only and should not be construed as a recommendation to buy or sell the same. All securities mentioned herein may or may not form part of the holdings of First Sentier Investors’ portfolios at a certain point in time, and the holdings may change over time

All market capitalisations, valuations, growth rates, balance sheet positions, and financial performance statistics are from Factset, 4 March 2024

Performance statistics are in local currencies


  1. Bloomberg data to 1 March 2024. 

  2. The top 10% of stocks by size vs the entire US stock market, Jesse Felder 14 Feb 2024

  3.  Bloomberg data, sourced 1 March 2024

  4. CNN, 24 January 2024

  5. World Economic Forum Annual Meeting 2023

  6. HDFC Bank Annual reporting 2023

  7. The Economic Times, India quoting Deepak Parekh, Chairman of HDFC Ltd, 1/11/2022

  8. OECD, 7 June 2023

  9. Atlas Copco Annual reporting 2023

  10. Edwards Lifesciences Annual reporting 2022

  11. Fortinet 2022 annual report 

  12. Edwards Lifesciences 2022 Sustainability report

  13. Infineon website accessed 8/3/2024

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