Searching for European "core assets" to forcibly benchmark against the "Mag 7"?

Since last year, the technology stocks led by the "Big Seven" have strongly supported the rise of the US stock market, gaining great reputation. To benchmark the "Big Seven," Goldman Sachs, Citigroup, and Societe Generale have all nominated the European version of the "Magnificent Seven." However, the lists are not completely consistent, and there are doubts about whether their overall performance can match that of the "Big Seven."

The European Version of the "Magnificent Seven"

As early as 2020, Goldman Sachs selected eleven heavyweight stocks and named them "Granolas," including GlaxoSmithKline, Roche, ASML, Nestle, Novartis, Novo Nordisk, L'Oreal, LVMH, AstraZeneca, SAP, and Sanofi.

It is reported that Granolas account for a quarter of the market value of the Euro Stoxx 600 index and have contributed to 60% of the total gains in European stocks over the past year.

Citigroup analyst Beata Manthey believes that the "Super Seven" of European stocks are Novo Nordisk, ASML, LVMH, SAP, Schneider Electric, LafargeHolcim, and Ferrari.

Manthey stated that the prices of these super heavyweight stocks in Europe are lower than the "Big Seven" in the US, and their profit margins are equally attractive.

Societe Generale, based on the contribution to the rise of the Euro Stoxx 600 index since January 2020, selected the "Seven Wonders of Europe": Novo Nordisk, ASML, LVMH, SAP, Siemens, Schneider Electric, and Hermes.

Societe Generale stated that the reason for choosing these companies is that their dependence on the European market is relatively low:

"The 'Seven Wonders of Europe' also have relatively limited investments in Europe (accounting for 23.4% of their sales), while the overall investment level of the Euro Stoxx 600 index is 44.2%.

This may be due to their strong rating upgrades (forward P/E ratio of 27.2 times) and a premium of 110% compared to the Euro Stoxx 600 index (P/E ratio of 13 times)."

Looking at specific individual stocks, it can be seen that Novo Nordisk, LVMH, ASML, and SAP all appear in the above three nominations, seemingly being considered as the more outstanding "European Stock Beatles."

Citigroup's nomination of Ferrari and LafargeHolcim, as well as Societe Generale's nomination of Hermes, emphasize the unique aspect of Europe - luxury goods, which have also performed well since the beginning of 2024.

Data shows that since the beginning of 2024, the stock prices of Ferrari, LafargeHolcim, and Hermes have all risen by more than 20%, while industry giant LVMH has risen by around 15%.

Forcibly Benchmarking the "Mag 7"?

However, there are also opinions questioning whether these nominations can truly benchmark the "Big Seven." Regarding the Granolas proposed by Goldman Sachs, some media outlets have pointed out that if we narrow the time frame to the present year of 2023 (when the concept of the "Seven Sisters" entered the public eye), it is found that Granolas' performance is still not as good as the "Seven Sisters".

For example, Roche fell by 15.8% in 2023 and has dropped by 4.6% so far this year, becoming the stock that has dragged down the STOXX 600 index the most. In comparison, the worst-performing stock in the "Seven Sisters," Apple, has still risen by 30% since January last year.

Mohit Kumar, Chief Economist and European Strategist at Jefferies, believes that the issue lies in the fact that the "Seven Sisters" combine growth stocks and quality stocks, but he "can't imagine" a similar concept in any industry in Europe.

Apart from mega-cap stocks, there seems to be no mid-cap stock that can compare with the "Seven Sisters".

Among the STOXX 600 index, the 7 stocks with the highest gains since the beginning of 2023 (BE Semiconductor Industries, Leonardo, UniCredit, Pandora, ASM, Rheinmetal, and Rolls-Royce) have an average increase of 172% (with Rolls-Royce lifting the average by 301%), but still fall short of the "Seven Sisters" average increase of 156%.

In conclusion, the European market has not yet been able to provide a stock group that truly matches the "Seven Sisters". However, some believe that these nominations highlight the cross-industry nature of the European stock market, potentially offering investors a more diversified portfolio.