Europe has developed its own dominant stocks in the market. While the U.S. has the Magnificent 7, Europe's largest companies have come to be known as the Granolas (GSK, Roche, ASML, Nestlé, Novartis, Novo Nordisk, L’Oreal, LVMH, AstraZeneca, SAP and Sanofi).
August 2, 2024
Large European stocks are a broader group
Source: FactSet. CAGR = compound annual growth rate. Granolas is an acronym coined by Goldman Sachs to represent the 11 largest European companies by market cap in 2020. The Magnificent Seven refers to the seven largest contributors to the S&P 500 in 2023. Data from January 1, 2020, through December 31, 2023. Past results are not predictive of results in future periods.
Many of these companies share attributes with the Magnificent Seven, such as strong balance sheets and promising earnings growth, although not all to the magnitude of the dominant U.S. technology companies. The Granolas are a diverse group of companies, from pharmaceutical giants to luxury goods maker LVMH, food and beverage behemoth Nestlé.
"We have found a lot of investment opportunities in Europe. The Granolas are global, so many of them can shift where they sell their products,” said Noriko Chen, an equity portfolio manager at Capital Group.
These companies derive a majority of their revenue outside Europe and can adjust their businesses across countries and regions, depending on political or economic shifts. For example, LVMH generates over 50% of its revenue from Asia and the U.S. combined, while biotech firm Roche earns about 70% of its revenue from North America and Asia. Then there’s ASML, a global leader in specialized semiconductor equipment. The Netherlands-based company derives almost all its revenue outside Europe, mostly from Asia and the U.S. Overall, companies in the MSCI Europe Index make 57% of their revenue outside of the region, underscoring the substantial influence of the U.S. and Asia on European earnings.
Market concentration is growing across regions. The Granolas represent 20% of the MSCI Europe, while the Magnificent Seven comprise 31% of the S&P 500.1
Noriko Honda Chen is an equity portfolio manager at Capital Group. She also serves on the Capital Group Management Committee. She has 34 years of investment industry experience (as of 12/31/2023). Noriko holds a bachelor’s degree in economics from Williams College and a degree in the Japanese Language Bekka Program at Keio University, Tokyo.