In the US, a select group of seven stocks have garnered much attention since last year for their impact on stock market performance. This illustrious group, known as the Magnificent Seven, includes Microsoft, Apple, Alphabet, Amazon, Nvidia, Meta, and Tesla. Collectively, these tech giants accounted for 32.5 percent of the S&P 500 index as of the end of April 2024.
Despite their uneven performance this year, the Magnificent Seven shone brightly in 2023, with an average return of 107 percent. Their influence was felt far beyond American shores, contributing roughly 40 percent to the MSCI World index’s 19.6 percent rise last year.
On this side of the Atlantic, a similar but lesser-known ensemble exists: the ‘Granolas’. This group comprises GSK, Roche, ASML, Nestlé, Novartis, Novo Nordisk, L’Oréal, LVMH, AstraZeneca, SAP, and Sanofi. While their presence is formidable in the European stock market, with a combined weight of nearly 22 percent in the MSCI Europe index, they haven’t achieved the same level of recognition as their American counterparts.
The Granolas are distinguished not only by their seniority—the term was coined by Goldman Sachs in 2020—but also by their sector diversity. Unlike the tech-centric Magnificent Seven, the Granolas span pharmaceuticals, consumer goods, and technology. Additionally, they boast quality credentials, with 10 of the 11 companies receiving a Wide Economic Moat Rating from Morningstar’s equity analysts.
However, their stock performance tells a different story. Last year, Novo Nordisk (50 percent), SAP (47 percent), L’Oréal (37 percent), and ASML (36 percent) delivered commendable returns. Yet, others like Roche (-7 percent), AstraZeneca (-1 percent), and Nestlé (0 percent) underperformed, leading to an average return of 18 percent for the Granolas—a stark contrast to the Magnificent Seven’s stellar performance.
Spotlight on BGF European
Investment strategies that stand out on Morningstar’s radar are often those with robust management and investment processes. Among these, BlackRock’s BGF European fund holds a Bronze Morningstar Medalist Rating. This fund, managed by Stefan Gries since June 2019, receives Above Average ratings for both its People and Process pillars.
Gries, who brings two decades of experience to his role, leads BlackRock’s fundamental European equities team. His investment philosophy prioritises shareholder value through a bottom-up approach, focusing on quality management, growth investment, return on capital, and unique company aspects. His strategy, while flexible, leans towards quality and growth styles.
At the heart of stock selection is the comprehensive and structured research conducted by Gries and his team, examining stocks through the lenses of wealth creation, resilience, and change. Gries also considers macroeconomic factors in portfolio construction.
As of January 2024, nearly 23 percent of Gries’ portfolio was invested in four of the Granolas: Novo Nordisk, LVMH, ASML, and L’Oréal, with Novo Nordisk commanding the highest confidence and a maximum portfolio weighting of 10 percent due to its strong performance.
Ronald van Genderen, senior manager research analyst at Morningstar, provides in-depth analysis and evaluation of investment funds, leveraging both quantitative and qualitative research. Morningstar is a knowledge partner of Investment Officer.