Market: Which European groups on the stock market are closest to the Magnificent 7 of Wall Street?

(BFM Bourse) – The bank UBS scrutinized European stocks to try to answer this question, using several approaches. Each of them includes one or more French groups.

The last few months have seen a plethora of acronyms spread across Europe to identify stocks on the stock market comparable to the “Magnificent Seven” (or “Mercenary Seven”) of Wall Street.

As a reminder, this expression refers to a group of “big techs” which almost single-handedly carried the American indices last year. These seven stocks bring together Nvidia, Microsoft, Alphabet, Amazon, Tesla, Meta and Apple.

Goldman Sachs had in 2020 identified a group of quality European stocks nicknamed the “Granolas”, for GSK (pharmaceuticals), Roche (pharmaceuticals), ASML (semiconductors), Nestlé (agri-food), Novartis (pharmaceuticals), Novo Nordisk ( pharmacy), L’Oréal (cosmetics), LVMH (luxury), Astrazeneca (pharmacy), SAP (professional software) and Sanofi (pharmacy). The American bank re-released this list in February to report that this group of stocks has experienced similar or even slightly better performances than the “Magnificent Seven” since 2021.

But it is not the only one. Citi chose the “Super Seven”, with Novo Nordisk, SAP, Richemont, LVMH but also the car manufacturer Ferrari, the French specialist in energy efficiency technologies Schneider Electric, and the Dutch ASML, which belongs to the world of semi -drivers. Deutsche Bank had isolated five “fabulous five”, namely L’Oréal, ASML, LVMH, Novo Nordisk and the Swiss food giant Nestlé. Finally, Société Générale has on its side its “seven wonders” of Europe, that is to say again Novo Nordisk, ASML, SAP, Schneider Electric and LVMH but also the German industrial conglomerate Siemens and the luxury group Hermès, reports Dow Jones Newswires.

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Seven is not a magic number

In a note, the bank UBS makes fun (gently) of this profusion of super groups of European stocks. Perhaps due to the desire not to miss the bullish rally in stocks or simply because of “the quest for the catchiest acronym, investors are on the hunt for the next group of stocks that will generate superior returns “, she notes.

“We have seen an increase in efforts in Europe to replicate portfolios similar to the S&P 500’s ‘Magnificent 7’ with various iterations ranging from ‘Super 7’ and ‘7 Wonders of Europe’ to nods to your favorite cereals (granolas, Editor’s note)” she continues.

However, this does not prevent the Swiss bank from also engaging in the exercise of identifying values ​​similar to the Magnificent Seven via three approaches. That said, UBS frees itself from the cliché of giving a flashy name to its selection and refuses to retain a handful of stocks. She thus estimates that the “magic” number 7 does not work in Europe, because the seven largest stocks represent only 16% of the market capitalization of the Stoxx Europe 600 while the Magnificent 7 represent 25% of the S&P 500.

By using this approach stricto sensu, that is to say selecting values ​​which, combined, represent 25% of the Stoxx Europe 600, it arrives at… 18 values.

These are LVMH, Nestlé, Novo Nordisk, ASML, Hermès, AstraZeneca, Novartis, Roche, L’Oréal, SAP, Sanofi, Siemens, as well as the Dutch investment group Prosus, Christian Dior, a holding company holding a large stake shares of LVMH, the Anglo-Dutch consumer products specialist Unilever, the oil group Totalenergies, the spirits company Diageo, and the HSBC bank.

Several approaches

But the bank’s strategists propose an alternative approach which consists not of taking into account capitalization but the qualities attributed to the “Magnificent Seven”. That is to say, companies that combine high growth and operational quality, with also a return on equity (ROE).

This time they identify with 14 values. Novo Nordisk, AstraZeneca and L’Oréal are still there, and so is GSK. But UBS went looking for other titles: Inditex, the parent company of Zara, the Swiss specialist in automation and electrification ABB, the British RELX specialized in professional publishing, the gambling group Swedish online company Evolution or the specialist in credit data and risk management solutions Experian. The list is completed by the Spanish airport operator Aena, the collective catering group Compass, the elevator and escalator manufacturer Schindler, the airline Ryanair, and the small Italian luxury player Moncler.

UBS argues that these 14 stocks have beaten the Magnificent Seven since 2021, however with notable underperformance in 2023. Since the start of the year, their progressions are equal. The consensus also grants a potential of 11% over twelve months to these 14 stocks.

UBS’s latest approach: simply offer the strongest convictions of its analysts, whether buying or selling. And there we arrive at no less than 32 values ​​for purchase and 22 for sale. We have given you the list at the end of the article. But on the side of French values ​​in purchasing convictions are Danone, Publicis and Stellantis. And for sale there are Legrand and Worldline

UBS’s 32 strong convictions when buying

  • Adyen (payments)
  • Anglo American (mining and metals)
  • BASF (chemistry)
  • Beazley (insurance)
  • BP (oil)
  • Richemont (luxury)
  • ConvaTec (health equipment)
  • CRH (construction materials)
  • Danone (agri-food)
  • Deutsche Boerse (stock exchange operator)
  • DSV (transport)
  • easyJet (air)
  • GSK (pharmacy)
  • Heineken (alcohols)
  • Imperial Brands (tobacco)
  • Inditex (clothing)
  • Infineon (semiconductors)
  • ING (bank)
  • Intertek (tests and certifications)
  • Just Eat (meal delivery)
  • Orsted (energy)
  • Publicis (advertising)
  • Rolls Royce (aeronautics)
  • SAP (professional software)
  • Schindler (elevators)
  • Shugard (warehouses)
  • Sika (chemistry)
  • Stellantis (automotive)
  • Stora Enso (paper production)
  • Telenor (telecommunications)
  • Tesco (distribution)
  • Whitbread (hospitality)

The 22 convictions for the sale of UBS

  • AstraZeneca (pharmacy)
  • Auto Trader (automotive marketplace)
  • Beiersdorf (cosmetics)
  • BT Group (media)
  • Burberry (luxury)
  • Diageo (spirits)
  • DNB (bank)
  • Equinor (energy)
  • Hapag Lloyd (shipping)
  • Hargreaves Lansdown (financial services)
  • Philips (health equipment)
  • Legrand (electrical equipment)
  • Metsa Board (containers)
  • Rentokil (business services)
  • Siltronic (semiconductors)
  • Softcat (software)
  • Swiss Re (insurance)
  • Umicore (chemistry)
  • Verbund (energies)
  • Vistry (house construction)
  • Volvo (automobile
  • Worldline (payments)

Julien Marion – ©2024 BFM Bourse

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