The Rise of the GRANOLAS: 11 Stocks Propel Europe's Markets to Unprecedented Heights

In an extraordinary display of market influence, just 11 heavy-hitting stocks, fondly referred to as the GRANOLAS, have been responsible for half of the remarkable gains pushing the pan-European Stoxx 600 stock index to its record-high closure this past Friday. This coalition of powerhouse companies has been at the forefront of Europe's stock market performance, exhibiting a collective market dominance reminiscent of America's 'Magnificent Seven' tech giants.

Identifying the GRANOLAS

The GRANOLAS lineup includes a slate of high-performing enterprises: GSK, Roche, ASML, Nestle, Novartis, Novo Nordisk, L'Oreal, LVMH, AstraZeneca, SAP, and Sanofi. These companies are considered 'internationally exposed quality growth compounders' and are noteworthy for their significant market cap within Europe, a descriptor awarded by Goldman Sachs in 2020.

Comparing Titans: GRANOLAS vs. Magnificent Seven

Not only have the GRANOLAS gained traction outperforming the U.S. tech behemoths over the past two years, but they've done so with a stability that's twice as robust, contributing to an impressive risk-adjusted performance metric. However, despite trading at high price-to-earnings ratios, indicative of investor confidence in future growth, they remain undervalued when placed side by side with their American counterparts.

Forecasting Continued Dominance

With solid earnings growth, reliable margins, and strong balance sheets, the GRANOLAS are projected to sustain their momentum. Goldman Sachs anticipates a compound annual growth rate in revenue of 7% through 2025, overshadowing the 2% expected for the broader market minus this group. The dividends these companies offer, ranging from 2% to 2.5%, are icing on the financial cake for shareholders.

Is Concentration a Concern?

Such a concentration of market gains does raise the specter of risk. Diverse industry representation within the GRANOLAS may provide some protection against concentrated risk, but analysts are vigilant. Potential market complacency could leave it exposed to negative surprises, hinting at the need for a broadening of market performance beyond a select few high-cap entities to ensure stability and continued growth.

Europe, Stocks, GRANOLAS