Europe’s ‘Granolas’ fuel record stock market surge

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Eleven companies dubbed the “Granolas” propelled European stocks to a record high this week, with their outsized contribution echoing the better-known “Magnificent Seven” in the US.

The crunchy acronym was coined by Goldman Sachs for pharma companies GSK and Roche, Dutch chip company ASML, Switzerland’s Nestlé and Novartis, Danish drugmaker Novo Nordisk, France’s L’Oréal and LVMH, the UK’s AstraZeneca, German software company SAP and French healthcare firm Sanofi.

In the past 12 months the group has accounted for 50 per cent of gains on the Stoxx Europe 600 index, which hit a new high on Thursday, and for about half of all mergers over the past five years.

The data suggests Europe is experiencing a similar phenomenon to the US, where fund managers are increasingly concerned about the narrowness of a rally led by tech companies such as Nvidia, which surged to a $2tn valuation on Friday.

“The big keep getting bigger,” said Peter Oppenheimer, Goldman’s chief global equity strategist and head of macro.

“This idea that you were getting significantly increased concentration in the US market has grabbed massive attention, but it’s also being reflected in other markets,” said Oppenheimer. He expected the Granolas to drive “nearly all” of the combined revenue growth of Stoxx 600 companies over the next few years.

The Granolas as a group have climbed 18 per cent over the past 12 months beating the Stoxx 600’s 7.5 per cent rise over the same period.

Over the past three years, the Granolas have performed in line with the US’s Magnificent Seven — a group of technology stocks comprising Apple, Microsoft, Alphabet, Amazon, Tesla, Meta and Nvidia — and with much lower volatility, though they have not kept pace over the past 12 months.

The Granolas are more diverse than the exclusive tech focus of the Magnificent Seven….