LIVE MARKETS-GRANOLAS or Mag-7? GS says one has more crunch right now

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GRANOLAS OR MAG-7? GS SAYS ONE HAS MORE CRUNCH RIGHT NOW

The performance gap between the U.S's and European companies biggest companies has widened dramatically, according to Goldman Sachs who says Europe's most valuable names might be worth another look.

GS dubs the region's largest companies the GRANOLAS. Namely GSK, Roche, ASML, Nestle, Novartis, Novo Nordisk, L’Oreal, LVMH, Astrazeneca, SAP, and Sanofi.

Together they form roughly a quarter of Europe's overall market cap, and are largely flat year-on-year, a fact that GS says provides a lesson on the risks of high concentration.

"Last year, many of these large European companies fell short of high consensus expectations. So, although their earnings continued to grow (at a faster pace than the rest of the market), their valuations experienced a significant decline," they wrote in a note.

And Europe's market leaders had a different trajectory compared to their U.S. counterparts - the Magnificent 7 - which make up roughly one-third of the market and returned about 50% since January 2024.

Indeed Europe's leading companies have experienced one of the largest de-ratings in Europe.

But for several reasons, the GS team thinks there is a compelling case for GRANOLAS to outperform.

"...the combination of lower rates, a weak euro, potential positive earnings surprises, improved consumer confidence in China, and the re-establishment of their premium growth narrative could act as significant catalysts for a rebound in the GRANOLAS."

GS equity research analysts have a buy-rating on seven of the 12 companies in that category, with an average upside of 22%

(Lucy Raitano)

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