Granolas stock hits new high in Europe, included in Magnificent 7 comparison

The group’s momentum, which includes GSK, Roche, ASML, Nestlé, Novartis, Novo Nordisk, L’Oréal, LVMH, AstraZeneca, SAP and Sanofi, has been compared to the Magnificent Seven, a similar group. caused concern. Concentration risk in European stock markets.

Together, GRANOLAS accounts for about a quarter of the Stoxx 600’s total market capitalization, and Goldman analysts said in a note last week that GRANOLAS has a strong track record in the current cycle, with solid earnings growth, high and stable margins, and more. He emphasized that the growth of the students is indicative of the qualities expected of them. and a strong balance sheet.

“We believe banks also stand to benefit from the structural shift towards passive investing and the lack of liquidity in European stock markets,” Wall Street Bank analysts suggested.

“From a global perspective, GRANOLAS has outperformed even the so-called Magnificent 7 over the past two years. Its (out)performance is even more impressive on a risk-adjusted basis, with volatility just below the Magnificent 2. 7, Granolas helps increase the Sharpe ratio. ”

The group notes that while stock prices are trading at high price-to-earnings ratios (P/E ratios), a measure of whether stocks are overvalued, this is “not unusual for growing companies” and that noted that Granolas is trading at a significant discount compared to Magnificent. Seven.

Furthermore, Goldman Sachs expects strong growth momentum to continue, with compound annual revenue growth for GRANOLAS expected to be 7% through 2025, compared to the broader In the market, it is 2%. Also, 11 stocks offer shareholders a dividend yield in the range of his 2-2.5%.

“This suggests that in Europe, almost all of the STOXX 600 revenue growth is from GRANOLAS, which we believe will be sustained by high barriers to entry, strong balance sheets, and significant investments. “We reinvest the same percentage of our cash flow,” Goldman Sachs added, “a spectacular 7th place” in R&D and growth capital spending.

While this concentration of stock market profits and the potential for further concentration has raised concerns about concentration risk, some analysts believe that the diverse sectors represented by the group I think there is a possibility of some degree of isolation.

Tim Hayes, chief investment strategist at Ned Davis Research, told CNBC on Monday that market participants are looking at recent comparisons to the current situation at the end of 2020, when the market was concentrated in a few large companies. He said it should be done. cap stock.

“What happened after that was that the market expanded and we went into 2021 and it turned out to be a very good year with very low volatility. Markets have expanded in anticipation of economic expansion. Earnings growth is coming through sectors across the globe,” Hayes said.

He suggested this had created a “huge sense of complacency” in the market, encouraging lingering investor confidence despite “misalignment” occurring behind the scenes.

“This is what created that very narrow market at the end of 2021, because we started to see all the signs that attracted us, these supply chain pressures, inflationary pressures, rising commodity prices, so we started to see more and more. Hayes added, “We’re going to enter a bear market in 2022 because sectors have started to diverge.”

This doesn’t necessarily have to be a negative indicator at this point, but the longer the current complacency lasts, the more vulnerable the market will be to bad news or the failure to deliver good news that was priced in. he suggested.

“We’ve been looking at this situation recently with expectations that we’d see this many rate cuts, but now it turns out that there may not be as many rate cuts as the market thought. We did. We set back a little bit,” Hayes said.

“If the market becomes too complacent, it could happen on a larger scale, making some negative surprises more likely.”