- Wednesday, October 16, 2024
The stock market has been dominated by the famous Magnificent 7 tech stocks, propelling the S&P 500 to new heights. However, for those seeking a different investment perspective in this top-heavy market, a promising group has emerged: the GRANOLAS.
Coined by none other than Goldman Sachs, the GRANOLAS comprise some of Europe's largest companies in terms of market capitalization. This elite group includes GSK, Roche, ASML, Nestlé, Novartis, Novo Nordisk, L'Oréal, LVMH, AstraZeneca, SAP, and Sanofi. Though they may not have garnered as much attention as the Magnificent 7 - Microsoft, Apple, Alphabet, Amazon.com, Nvidia, Tesla, and Meta Platforms - their collective performance has been truly remarkable.
Remarkably, the GRANOLAS have accounted for an astounding 60% of all gains in Europe over the past year. As noted by Goldman Sachs analyst Guillaume Jaisson in a recent Monday memo, these eleven stocks represent a significant quarter of the market capitalization of the pan-European Stoxx 600 index. It is hence clear that their impressive performance has played a pivotal role in countering sluggish economic growth in the region.
Europe's hidden powerhouses continue to defy expectations and prove instrumental in fueling the success of European equities. While the Magnificent 7 may grasp the headlines with their dazzling performances, investors should not overlook the steady rise of the GRANOLAS. As the global market landscape evolves, these European giants remain a compelling investment opportunity worth serious consideration.
GRANOLAS: Outperforming the Magnificent 7
According to a report by Goldman Sachs, the GRANOLAS have not only outperformed but have also delivered better returns for less risk than the so-called Magnificent 7 over the past two years. This is even more astounding considering that their volatility is two times lower than that of the Magnificent 7.
In addition to their impressive performance, the GRANOLAS trade at a price-to-earnings ratio of 20, which is a 30% discount compared to the Magnificent 7's ratio of 30. Furthermore, the GRANOLAS offer an average dividend yield of 2.5%, significantly higher than the S&P 500's average of 1.5% and the meager 0.3% dividend offered by the Magnificent 7.
Goldman Sachs highlights that the GRANOLAS possess qualities that are expected to dominate in this current cycle, including strong earnings growth, low volatility, high and stable margins, as well as robust balance sheets. Additionally, they stand to benefit from the structural shift towards passive investment and the lack of liquidity in the European equity market.
Despite the peculiar name, the GRANOLAS might be worth considering for a balanced portfolio based on Goldman Sachs' analysis.
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