📈 Granolas Lead EU Stock Market to Its All-Time High

🐺 Hi pack-mates,

This is Howling Markets, the newsletter that provides all the necessities in a compact form, just like a nutritious granola bar!

Today we will be covering:

• Education: What Are the “Granolas”? 🌾

• Binance Fined $4.3bn Over Violation of Anti-Money-Laundering Laws 💰

• Granolas Lead EU Stock Market to Its All-Time High 📈

• Equity and Debt Markets Daily Update ⚖️

• And more!

Market Watch 👀

What Are “Granolas”?

At this point, everyone is well-aware of the Magnificent 7, the group of US companies that has been driving the US stock market to the moon over the past years. The magnificent seven are tech companies with a strong interest in AI, such as Nvidia, Meta, and Google, which has helped them achieve these stunning returns. But what if I told you that existed a similar group of stocks in also in the European stock market?

This European group is nicknamed “Granolas”, an acronym coined by Goldman Sachs that contains all the initial letters of the 11 components (some companies whose name started with the same initial were compressed into a single letter in the acronym). Despite having four more members than the American counterpart, this group is much more diversified, and it contains luxury, pharmaceutical, technology and food companies.

More specifically, the Granolas is composed by the luxury brands LVMH and L’Oréal, the pharma and healthcare companies Novartis, Novo Nordisk, AstraZeneca, Sanofi, GSK and Roche, the Swiss brand Nestlé, and finally the tech companies SAP and ASML.  

The combined market capitalization of the Granolas only amounts to $3 trillion, which compared to the $13 trillion of the Magnificent 7 might seem quite a small amount. However, the Granolas were able to account for almost 50% of the returns of the Stoxx 600, the European benchmark index.

Additionally, over the past three years the Granolas were able to achieve the same returns as the Magnificent 7, almost perfectly mimicking their performance despite one significant difference. Being such a diversified index, the Granolas were able to avoid the sharp recession that occurred in the US, remaining more stable and only suffering from one year of sideways market performance instead of a 25% loss.

Finally, it is also important to mention the prices of these securities. Despite their great performance, their forward P/E ratio is just around 20, as opposed to the Magnificent 7’s which is about 30. So, considering that in proportion they are cheaper, they might be a great diversification opportunity for an international stock portfolio. Did you previously know this interesting group of European stocks?

Binance Fined $4.3bn Over Violation of Anti-Money-Laundering Laws

Three months ago we covered the beginning of the trial that has seen Binance and its CEO at the center of a legal storm involving anti-money laundering regulations during a years-long period.

On Friday, the $4.3 billion dollar section was confirmed once the judge signed the plea deal where the world’s largest exchange took responsibility for their actions and stated that they will work on improving their anti-money-laundering controls and know-your-customers procedures.

Aside from the fine, the plea deal also contained the requirement of having Changpeng Zhao, the founder and CEO, step down from his executive position together with the mandatory requirement to appoint an independent compliance monitor.

Additionally, the former CEO Zhao has pleaded guilty to separate charges related to this case and he will be sentenced in April 2024. What do you think of these sanctions?

Today’s Howling Question

And now, it is time for our howling question!

Unfortunately, we have seen how the pharma sector has been dragging down the Granolas due to their poor performance, however there are some great stocks that achieved quite significant double-digit returns since the start of 2023. Which do you think has been the best performer among the Granolas?

1. Roche

2. Novo Nordisk

3. LVMH

4. SAP

5. ASML

Bonus: in this list there are both the best and the worst Granolas performers. Try to find them both!

Try to answer the question by yourself, and then check the correct answer after the last interesting news!

Granolas Lead EU Stock Market to Its All-Time High

As we have briefly mentioned, the Granolas justified almost half of the Stoxx 600’s performance, helping it achieve its great returns. Since the beginning of 2023 the European stock market index gained over +17% and it finally closed above its previous all-time high after more than 2 years.

The previous record was set on the 5^th of January 2022, and it was broken first on Thursday and then extended on Friday, closing just below the 500 level. But how did the Granolas perform since the beginning of last year?

Since the start of 2023 the Granolas gained, on average, +22.07%, a relatively small figure if compared to the +100% the Magnificent 7 gained just during the course of 2023. However, this has to do with the composition of these two groups.

Over the past couple of years, the news and returns of AI have been driving companies’ valuations through the roof, whereas the pharmaceutical and healthcare sectors have been underperforming the market in both continents.

The Granolas are composed of 6 pharma companies, two tech companies, two luxury companies and one consumer non-durables. The average returns of the 6 pharma companies since the beginning of 2023 has been just 11.19% whereas the one of the remaining five companies was 35.13%.

Additionally, it is also extremely important to mention that all Granolas stocks pay dividends, so the actual return on investment will be different, and significantly higher, than the simple stock appreciation. On the other hand, only four out of the Magnificent 7 pay dividends, and on average the dividend yield is lower.

Equity and Debt Markets Update

And now, our daily markets update!

Continuing Thursday’s frenzy, the SPX started Friday by opening +0.27% higher and continuing to climb almost +0.50% with respect to the previous day’s closing price. However, before the end of the trading session the price came back down, below the opening price, and it closed just +0.03% higher than Thursday’s close.

On the other hand, the benchmark 10 year US government bond yields fell quite drastically. Despite starting the session without any price gap, the yield started falling almost immediately, closing the day -1.73%.

Answer

The correct answer is 2) Novo Nordisk

Novo Nordisk is a Dansh Drugmaker company extremely active in the pharmaceutical and healthcare sector. Given the extremely poor performance of all the other pharma companies in the Granolas, Novo is definitely an outlier due to its +81.12% returns since the beginning of 2023.

Howl-Worthy Memes 😂

🐺 See you next time!

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