In the last twelve months, GRANOLAS shares recorded over 500 billion euros in revenues, showing an annual increase of 8%.
Goldman Sachs has put the spotlight on European stock market champions with a particular nickname: the GRANOLAS.
The term was inspired by the Magnificent 7 of the US market, the technology giants that lead Wall Street. Refers to a select group of European heavyweights, including GSK, Roche, ASML, Nestlé, Novartis, Novo Nordisk, L’Oréal, LVMH, AstraZeneca, SAP and Sanofi.
These companies, with a market capitalization of more than €2.6 trillion, have eclipsed the performance of the European stock market over the years.
The growth of GRANOLAS
GRANOLAS represent approximately a quarter of the market capitalization of the STOXX 600 and are equivalent to the capitalization of sectors such as Energy, Basic Resources, Financials, and Automobiles.
Reflecting on the changes in the European market, Goldman Sachs has noted a significant shift from traditional industry leaders, such as Telecoms and Oil, of two decades ago, to a broad range of sectors today.
“Twenty years ago, at the beginning of 2000, the 10 largest companies in Europe by market capitalization were all Telecoms and Oil companies, except for HSBC. If we fast forward to the Covid crisis, there were no banks, oil or telecom companies among the 10 largest in Europe,” wrote Goldman Sachs analyst Peter Oppenheimer.
In the last twelve months, GRANOLAS recorded over 500 billion euros in revenues, showing an annual increase of 8%.
They have achieved an average gain of 15% over the past year, outpacing the STOXX 600’s 5% and contributing 60% of the index’s overall growth.
Less ’expensive’ than the Magnificent 7
Currently, GRANOLAS trades at a price-to-earnings (P/E) ratio of 20x. Despite trading at a premium to European markets, this is normal for growth companies and represents a 30% discount to the US ’Magnificent Seven’, which trades at a P/E of 30x.
“GRANOLAS focus on creating shareholder value and pay a relatively high dividend,” Goldman Sachs wrote.
With an average dividend yield of 2.5%, the GRANOLAS significantly outperforms the S&P 500 by 1.5% and far outperforms the Magnificent 7’s 0.3%.
Consensus forecasts predict robust growth for these composers, with a compound annual growth rate (CAGR) in revenue expected to be 7% through 2025.
The context
GRANOLAS moves on some of the most promising structural themes, such as the aging population, advances in AI and robotics, and ESG (Environmental, Social, and Governance). They shine with their hefty dividends, solid growth prospects, and vast international reach.
However, their fortunes are not without risk.
With less than 20% of revenues coming from Europe, their fates are linked to the dynamics of global markets. Currency fluctuations, especially a stronger euro, could hit GRANOLAS more than other domestic and small-cap European stocks.
A 37% market exposure to the US economy introduces tariff risks, especially if a pro-protectionist Republican presidency led by Donald Trump wins the election.
However, with substantial assets based in the US, Goldman believes GRANOLAS can withstand such uncertainties. The large exposure to the Chinese market by LVMH, L’Oréal and ASML adds risk to the investment due to geopolitical tensions between Europe and China.
High concentration in a few stocks could lead to a sharp correction if market sentiment changes.
Original article published on Money.it Italy 2024-02-19 07:03:00. Original title: Cosa sono le azioni GRANOLAS? Tutti i dettagli da sapere
