What are the “Granolas”? Discover the 11 stocks driving European equity markets

Europe’s equity markets are being propelled forward by eleven key stocks, including GlaxoSmithKline, Nestlé and L'Oréal. Why are they called the Granolas and should you invest in them?

Woman researching stocks while eating a bowl of granola.
(Image credit: Getty Images - Eva-Katalin)

You have probably heard of the Magnificent Seven – the tech stocks driving record US market highs. But what are the Granolas?

There has been a lot of noise around US equity markets in recent months as the S&P 500 soared to new heights. But what you might now know is that the European equity market also reached a record high in February, when the Stoxx 600 Index surpassed its 2022 peak. It has continued to rise since.

Eleven key stocks have been instrumental to this strong performance, affectionately known as the Granolas. This term was coined by Goldman Sachs in 2020 based on a loose acronym of the stocks’ names. It includes GlaxoSmithKline, Roche, ASML, Nestlé, Novartis, Novo Nordisk, L’Oréal, LVMH, AstraZeneca, SAP and Sanofi. 

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These eleven stocks have returned an enticing 72% since the start of 2021 and, collectively, they now make up around a quarter of the Stoxx 600’s market cap. But should you invest in them? And how does this compare to the Magnificent Seven?

What are the Granolas? 

The group of eleven stocks known as the Granolas span five different sectors. As such, they offer a broader opportunity set than the Magnificent Seven, which are all tech stocks

We share a breakdown of the eleven stocks, outlining their sector and their key business activities. 

  • GlaxoSmithKline: GlaxoSmithKline is a British pharmaceutical and biotech company which falls into the healthcare sector. It was involved in the Covid vaccine development programme, and partnered with Sanofi on this project.
  • Roche: Roche is a Swiss pharmaceutical and diagnostics company. It falls into the healthcare sector.
  • ASML: ASML provides the semiconductor industry with the materials it needs to make computer chips. It falls into the technology sector.
  • Nestlé: Nestlé is the world’s largest food and beverage company, headquartered in Switzerland. It falls into the packaged foods sector.
  • Novartis: Novartis is a Swiss medical and pharmaceutical company. It falls into the healthcare sector.
  • Novo Nordisk: Novo Nordisk is a Danish pharmaceutical company, responsible for producing 50% of the world’s insulin supply. It falls into the healthcare sector.
  • L’Oréal: L’Oréal is a French beauty, cosmetics and personal care company which owns brands like Garnier, Maybelline and Lancôme. It falls into the household and personal products sector.
  • LVMH: LVMH is a French luxury goods company. Its brands include Louis Vuitton, Moët, Hennessy, Tiffany & Co., Dior, Stella McCartney, and more. It falls into the consumer cyclical sector.  
  • AstraZeneca: AstraZeneca is a British-Swedish pharmaceutical and biotech company. It was involved in the Covid vaccine production programme. It falls into the healthcare sector.
  • SAP: SAP is a German software company, whose products help to manage business processes. It falls into the technology sector.
  • Sanofi: Sanofi is a French pharmaceutical and healthcare company. It has a large portfolio of vaccines, among other products, and partnered with GlaxoSmithKline as part of the Covid vaccine programme. It falls into the healthcare sector.

How have the Granolas performed? 

The Granolas have displayed strong performance, returning 72% since the start of 2021. While this is less than the 98% returned by the Magnificent Seven over the same period, the Granolas offer stronger diversification as they are spread across a wide range of sectors. 

Of course, you don’t have to choose one or the other – you can hold a selection of both the Granolas and the Magnificent Seven in your portfolio to take advantage of the unique return opportunities offered by each company.

What’s more, it’s worth researching each company individually. You don’t have to hold the whole set. For example, lots of the biotech and pharmaceutical companies have had a rough ride over the last couple of years, while tech stocks like ASML and SAP have seen steadier gains.

Indeed, many biotech and big pharma businesses saw their stock prices soar over the course of the Covid pandemic. However, afterwards, they soon crashed back down when investors began to think they were overvalued. They were also negatively impacted by the higher interest rate environment

That said, it is also worth remembering that some sectors are cyclical. This means that they outperform or underperform other sectors at different points depending on where we are in the economic cycle. 

Economic cycles can be notoriously difficult to time correctly, so it is worth having a broad mix of sectors and companies in your portfolio at any given time. For example, we could see a future in which tech stocks crash and biotech stocks rally. 

Many biotech and pharmaceutical stocks have already started to recover from their lows at the end of 2023. Meanwhile, others like Novo Nordisk never dipped in the first place.

Should you invest in the Granolas?

European equities have long lagged their US peers – and this dynamic has only become more pronounced since the Global Financial Crisis of 2008. 

There are several reasons for this. The market is more complex and fractured, it doesn’t have nearly as many tech stocks and, more recently, it has felt the impact of inflation and the War in Ukraine far more keenly. This means there could be opportunities for investors to snatch European companies up at a bargain price. 

Commenting on the Granolas specifically, Fidelity’s Sam Morse and Marcel Stotzel said: “most of the valuation metrics are not overly stretched at present and we still see upside”. Morse and Stotzel are portfolio managers for the Fidelity European Fund and Fidelity European Trust PLC. 

They added that “many of the attributes [they] look for in stocks [...] are present in the granolas”, citing consistent dividend growth, a strong competitive position, good pricing power, earnings stability, ample cash generation, and strong balance sheets. 

Despite this, Founder and CEO of Boring Money Holly Mackay highlights the concentration risk associated with taking exposure to these companies through a broad market index, noting that “the big are getting worryingly big”. 

Against this backdrop, perhaps an active investment strategy could be a better option than a passive one, if you are looking for broader diversification. 

Katie Williams
Staff Writer

Katie Williams has a background in investment writing and is interested in everything to do with personal finance, investments, and financial news. Before joining the MoneyWeek team, Katie worked as an investment content specialist at Invesco EMEA, a global asset management firm, which she joined as a graduate in 2019. While there, she enjoyed translating complex topics into “easy to understand” stories. She studied English at the University of Cambridge and loves reading, writing and going to the theatre.