The Magnificent 7 tech stocks are the driving force behind the S&P 500’s rise to record highs. For investors concerned about the dynamics of this top-heavy market, there is a new group that may be worth paying attention to: GRANOLAS.
Coined by Goldman Sachs, GRANOLAS represents Europe’s largest companies by market capitalization, including GSK, Roche, ASML, Nestlé, Novartis, Novo Nordisk, L’Oréal, LVMH, AstraZeneca, SAP and Sanofi. Their collective performance over the past few years has been amazing, even if it wasn’t.
The Magnificent 7 Tech Stocks
S&P500
Rising to record highs. For investors concerned about the dynamics of this top-heavy market, there is a new group that may be worth paying attention to: GRANOLAS.
A term coined by Goldman Sachs
,
GRANOLAS represents some of Europe’s largest companies by market capitalization: GSK
,
Roche
,
ASML
,
nestle
,
Novartis
,
novo nordisk
,
loreal
,
LVMH
,
AstraZeneca
,
SAP
,
and sanofi
.
Even if they weren’t as eye-catching as the Magnificent 7, which includes Microsoft, their overall performance over the past few years has been impressive.
,
apple
,
alphabet
,
Amazon.com
,
Nvidia
,
tesla
,
and metaplatform
.
Goldman Sachs analyst Guillaume Jesson said in a note on Monday that GRANOLAS accounted for 60% of Europe’s gains over the past year and accounted for a quarter of the market capitalization of the pan-European Stoxx 600 index. He said that GRANOLAS accounted for the majority of the total. Jason added that these 11 stocks are the main reason why European stocks are performing well despite the region’s slow economic growth.
“From a global perspective, GRANOLAS has even outperformed the so-called Magnificent 7 in the past two years,” Jason wrote. “Their (out)performance is even more impressive on a risk-adjusted basis, with half the volatility of the Magnificent 7.”
In fact, according to Goldman Sachs, GRANOLAS delivers higher returns with less risk than the Magnificent 7. And that’s not its only quality. The group trades at a price/earnings premium of 20x, which is a 30% discount compared to Magnificent 7’s 30x (30x), which is lower than its historical discount. GRANOLAS also has an average dividend yield of 2.5%, which is much higher than the S&P 500’s average 1.5% and Magnificent 7’s only 0.3% dividend.
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“GRANOLAS has strong revenue growth, low volatility, high and stable profit margins, and a strong balance sheet – attributes we expect to prevail in this cycle,” said Jaisson. “We think they also stand to benefit from the structural shift towards passive investing and the lack of liquidity in European stock markets.”
The GRANOLAS moniker sounds more like a grain category than an equity strategy, but if Goldman Sachs is right, these names may be worth considering to build a balanced portfolio.
Email Jack Denton at jack.denton@barrons.com.
