The stock markets have been running hot over the past six months, setting numerous new record highs. Leading the pack are the „Magnificent Seven", whose stocks boast an impressive performance thanks to the hype surrounding artificial intelligence. However, they have also become quite expensive. For those seeking more affordable alternatives, there's no need to look far, as there are also a few stocks in Europe that can hold their own against the financial standing of major tech stocks like the „Magnificent Seven".

When looking at market capitalization, the large European companies are far from the global top. Europe's largest company, Novo Nordisk, has a market capitalization of 500 billion euros, not even making it into the top ten largest companies in the world. Nonetheless, Europe's stock markets share something with the American market: Only a handful of companies are responsible for the majority of the impressive index gains.

Back in 2020, it was the Americans at Goldman Sachs who compiled a portfolio of Europe's largest companies at the time, dubbing this collection „Granolas“ based on the initial letters of the eleven companies included. These stocks – also referred to as Grannnolass – include GSK (formerly GlaxoSmithKline), Roche, ASML, Nestlé, Novartis, Novo Nordisk, L'Oréal, LVMH, AstraZeneca, SAP, and Sanofi. Comparing the performance of these eleven Europeans with that of the „Magnificent Seven", both groups of companies have seen a value increase of well over 60% since the beginning of 2021 – though the European companies exhibited significantly lower volatility.

However, over a five-year period, the Europeans still lag significantly behind the American tech giants. Since the beginning of 2019, the „Magnificent Seven“ have surged by a remarkable 278%, while the Granolas, including dividends, have increased by „only“ 120%. On the other hand, European entities gain an advantage with reduced volatility. The Granolas experienced a maximum loss of 27% at one point, whereas the „Magnificent Seven“ faced losses of up to 44% at times. Given the already high valuations of some US giants and with an eye on the upcoming presidential elections next winter, this seems like a fair price for a relatively stable investment in stocks.

Having a closer look at the Granolas, it's noticeable that six of the eleven companies come from the pharmaceutical industry. Europe's answer to Big Tech is health and basic consumption. Leading the pack is Novo Nordisk, which has recently scored with weight-loss products, achieving an annual growth rate of 24% over the past decade. The shares of luxury conglomerate LVMH are not far behind, with an annual increase of 23%. Semiconductor giant ASML even achieved an annual growth rate of 24.5% over an even longer period of 20 years.

While software giant SAP – the only German company among the eleven Granolas – only achieved a comparatively modest annual increase of 10%, it was still a significant driver of the recent Dax rally. Together, the Granolas were responsible for almost 60% of the stock gains in Europe last year. In the Stoxx 600, they accounted for half of the gains. The Granolas dominate the index with a combined weighting of 25% – roughly equivalent to the weight that the „Magnificent Seven“ have in the S&P 500.

The eleven Granola companies share the characteristic of being compounders. These long-term performers boast a stable business model that has brought them success over decades and continues to do so. Most of them are world leaders in their respective fields. This applies to Nestlé in food, LVMH in luxury goods, but also to L'Oréal in cosmetics, or Novo Nordisk in diabetes.

The idea of bundling the largest European companies and thus often the biggest winners on the European stock market, creating a sort of European Magnificent Seven, is not exclusive to Goldman Sachs: For the Swiss bank UBS, ASML, Ferrari, Hermès, L'Oréal, LVMH, Novo Nordisk, and Siemens are among the top companies. According to the Swiss study, these seven are „highly profitable, innovative, and world-leading.“ „Their stock prices may have lagged behind those of the „Magnificent Seven“ in the US last year, but they have outperformed them over the last three years", explains UBS the selection of their Magnificent Seven.

eToro has also compiled a list of its top 7 players in Europe. For the broker, these include ASML, Adyen, Cap Gemini, Infineon, the British company Relx, SAP, and STMicro. Although these Magnificent Seven have only a fraction of the market value of the American „Magnificent Seven", they still show strong performance. What all these lists have in common is that they clearly demonstrate that there are also a few outperformers in Europe, whose stock performance can indeed compete with the „Magnificent Seven“ from across the Atlantic. Europeans score over Americans with lower volatility and currently lower valuations.

So far, there are no ETFs that focus exclusively on the Granolas, but there are some products like the Amundi ETF Stoxx Europe 50 or the iShares Stoxx Europe 50 ETF, where the Granolas make up to 43% of the portfolio. The key here is the reference index. While the Euro Stoxx 50 is limited to EU companies and therefore cannot include Granolas like GSK, Nestlé, Novartis, and AstraZeneca, the Stoxx Europe 50 contains the 50 highest capitalized companies in Europe and thus also companies from Switzerland or Great Britain.