While all the noise in the market is concentrated on the so-called A Magnificent Seven of US tech mega caps that is at the heart of the current bull run, another group of cap giants provide the same return BUT at the cost of much lower risk, being significantly cheaper than the Mag 7 /by metrics/ trading at a P/E of 20 versus M7’s P/E of 30. Also, the volatility of these stocks is twice as low as that of Mag 7.
Just like the Magnificent 7, this stellar basket of stocks has its own name, which may still be unknown to the masses. They are called GANOLAS – a term coined by Goldman Sachs to refer to European mega caps. /GSK (GSK), Roche (CH:ROG), ASML (ASML), Nestle (CH:NESN), Novartis (CH:NOVN), Novo Nordisk (NVO), L’Oreal (FR:OR), LVMH (FR :MC), AstraZeneca (AZN), SAP (SAP) and Sanofi (SNY)./
The companies have solid margins, and Goldman Sachs defines GRANOLAS as a suitable investment at times when the global GDP is below 3%, which the bank actually predicts for the next 3 to 5 years.
This was confirmed by GANOLAS in the current Q4 earnings season as well, with the group reporting solid growth led by Novo Nordisk’s success with slimming drugs and ASML’s surge in microchip machinery, although L’Oreal underperformed expected, partly due to the slowdown in its business in China.
While there is a myth in the markets that solid profits can be sought in US tech mega caps, in fact there are more “risk-free” risk positions under the surface without limiting the potential for returns.
Here’s the graphic proof – looking at the period from January 2021, to Friday’s closing levels, we see that the GRANOLAS group has completely matched the performance of the Magnificent Seven with a 63% return, BUT with an average volatility of 2018 that is twice -lower than M7.
In conclusion: For more conservative investors looking for growth outside the US for portfolio diversification, perhaps GRANOLAS is one of the best places to be. However, unlike M7, GRANOLAS does not yet have an ETF tracking their performance, so investors will have to buy each of the stocks individually.
Head Dealer Alexander Alexandrov