FAANGs;
BRICs;
PIGs.
The
financial
world
loves
acronyms.
Though
it
went
somewhat
under
the
radar
at
the
time,
one
of
the
most
recent
was
coined
by
none
other
than
Goldman
Sachs:
the
GRANOLAS.
Back
in
2020,
the
US
investment
bank
wanted
to
highlight
the
fact
financial
markets
in
Europe
are
also
driven
by
a
small
group
of
companies.
It
identified
this
group
of
11
quality,
growth-oriented
and
internationally-exposed
companies
as
the
GRANOLAS.
The
acronym
is
clearly
inspired
by
the
US
“Magnificent
7”
and
the
“FAANG”
stocks,
which
have
been
driving
both
Wall
Street
and
retail
portfolio
gains
in
the
last
five
years.
By
comparison,
the
GRANOLAS
group
is
a
select
group
of
European
heavyweights:
GSK
(GSK),
Roche
(ROG),
ASML
(ASML),
Nestlé
(NESN),
Novartis
(NOVN),
Novo
Nordisk
(NOVO
B),
L’Oréal
(OR),
LVMH
(MC),
AstraZeneca
(AZN),
SAP
(SAP)
and
Sanofi
(SANOFI).
With
a
combined
market
capitalisation
of
around
€2.7
trillion
(£2.3
trillion),
these
11
names
were
responsible
for
more
than
half
of
the
European
stock
market’s
gains
over
the
past
year.
Why
is
The
GRANOLAS
Outlook
Positive?
In
a
note
released
last
week,
Goldman
Sachs
analysts
argued
these
companies
exhibit
characteristics
that
are
expected
to
thrive
in
the
current
cycle,
such
as
solid
earnings
growth,
high
and
stable
margins,
and
strong
balance
sheets.
According
to
Sharon
Bell
of
Goldman
Sachs
Research,
European
equities
as
a
whole
could
rise
by
7.5%
in
2024,
supported
by
an
improving
economic
environment,
reasonable
valuations
and
the
prospect
of
nearly
flat
long-term
bond
yields.
“While
the
European
economy
has
its
problems,
the
biggest
European
companies
are
pursuing
growth
all
over
the
world,”
she
says.
“And
that
makes
them
quite
attractive.”
Moreover,
the
bank
believes
they
can
also
benefit
from
the
“structural
shift
towards
passive
investments
and
the
lack
of
liquidity
in
the
European
stock
market.”
And
speaking
of
passive
investments…
Investors
looking
to
get
GRANOLAS
exposure
without
having
to
buy
all
the
individual
securities
have
a
range
of
options
via
exchange-traded
funds
(ETFs).
Six
ETFs
(Plus
Two)
to
Invest
in
The
GRANOLAS
To
date,
there
are
no
products
expressly
dedicated
to
GRANOLAS.
We
therefore
had
to
do
an
analysis
of
the
portfolios
of
equity
ETFs
domiciled
in
Europe
to
identify
those
most
exposed
to
the
11
stocks.
Here
are
the
best
examples.
The
main
stock
indices
dedicated
to
European
large-cap
stocks
all
contain
them,
although
in
different
proportions.
The
STOXX
Europe
50,
for
instance,
has
42-43%
of
its
portfolio
exposed
to
GRANOLAS.
ETFs
tracking
this
include,
for
example,
the
iShares
STOXX
Europe
50
UCITS
ETF
EUR
Dist
(EUN),
or
the
Deka
STOXX
Europe
50®
UCITS
ETF
(EL4Y).
These
funds
devote
about
7.1%
of
their
assets
to
Novo
Nordisk,
5.1%
to
Nestlé
and
4.2%
to
LVMH,
down
to
1.5%
to
GSK.
The
Euro
STOXX
50
index,
on
the
other
hand,
stops
at
27-28%
exposure
to
the
Goldman
Sachs-coined
equity
group,
while
it
rises
to
36%
in
its
ESG
version,
replicated
by
the
Deka
EURO
STOXX
50®
ESG
Filtered
UCITS
ETF
(ELFA).
This
fund
dedicates
12.2%
of
the
portfolio
to
ASML,
8.4%
to
LVMH
and
6.7%
to
SAP.
With
its
425
stocks,
MSCI’s
Europe
index
is
considerably
more
diversified
than
the
previous
benchmark,
but
also
offers
exposure
to
all
11
GRANOLAS
stocks. In
this
case,
however,
their
weighting
is
around
22%
of
the
total
assets.
This
share
rises,
however,
to
33%
in
the
case
of
the
Amundi
MSCI
Europe
Climate
Action
UCITS
ETF
Dist
(AE5B),
which
is
designed
to
identify
European
companies
rated
as
leaders
in
their
sector
in
terms
of
their
positioning
for
climate
transition.
Again,
the
leading
stock
position
is
Novo
Nordisk
with
5.5%
of
the
portfolio,
followed
by
ASML
at
5.2%.
The
same
applies
to
the
STOXX
Europe
600,
which,
due
to
the
breadth
of
its
portfolio,
is
not
able
to
offer
significant
exposure
to
the
GRANOLAS,
stopping
at
20
per
cent
of
assets.
This
is
not
the
case
for
the
Franklin
STOXX
Europe
600
Paris
Aligned
Climate
UCITS
ETF
(EUPA),
however.
It
dedicates
35%
of
its
assets
to
the
11
GRANOLAS
stocks,
with
ASML
standing
out
as
the
main
component
(5.5%).
A
similar
case
occurs
with
SPDR’s
STOXX
Europe
600
SRI
UCITS
ETF
EUR
Acc
(600X),
whose
portfolio
devotes
almost
35%
of
its
exposure
to
eight
of
the
11
GRANOLAS
stocks.
Exposure
is
more
evenly
distributed
here,
ranging
from
3.5%
of
Novo
Nordisk
to
1%
of
Sanofi.
Then
there
are
the
sector
ETFs.
Within
the
GRANOLAS
group,
six
out
of
11
companies
are
part
of
the
pharmaceutical
industry:
Novo
Nordisk,
Novartis,
AstraZeneca,
Roche,
Sanofi
and
GSK
are
also
the
top
six
positions
in
funds
such
as
the
SPDR
MSCI
Europe
Health
Care
UCITS
ETF
(STWX)
or
the
iShares
S&P
500
Health
Care
Sector
UCITS
ETF
USD
(QDVG).
These
strategies
are
by
nature
very
concentrated,
with
these
six
names
weighing
in
at
around
70%
of
the
total
exposure.
The
case
of
technology
strategies
is
different,
and
includes
the
iShares
MSCI
Europe
Information
Technology
Sector
UCITS
ETF
(ESIT),
where
a
50%
exposure
to
the
GRANOLAS
group
is
only
achieved
by
a
large
weighting
in
ASML
(32%)
and
SAP
(18%).
This
makes
it
insignificant,
therefore.
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