Everyone will be familiar with granola, the crunchy cereal. The mix of rolled oats, nuts, honey, dried fruit and much more delivers a real energy boost on many breakfast tables every day. You may well now be asking, though, what it has to do with the stock market. It’s very simple: almost exactly three years ago, Goldman Sachs also created a “tasty bite” for investors under the name GRANOLAS. This is an explicitly select group of European growth companies that are set to be winners over the next few years and whose initials went to make up the acronym. Unlike in the USA, where the abbreviation FAANG is the measure of all things, in Europe GRANOLAS is not just about tech stocks. Instead, it covers a combination of structurally strong and/or stable segments from healthcare and the consumer goods and technology sector.
In the view of Goldman Sachs, the particular features of attractive companies are strong balance sheets, double-digit earnings growth, high and stable margins, sustainable dividends, defensive characteristics and low volatility. The activities of these companies also have the potential to deliver lasting change to the way business is done in the future and how consumers spend their money. The US investment bank believes that the GRANOLAS will continue to play an important role because they exhibit qualities that are expected to dominate the next cycle.
The Goldman strategists reckon the eleven most promising companies on the old continent are GlaxoSmithKline, Roche, ASML, Nestlé, Novartis, Novo Nordisk, L’Oréal, LVMH, AstraZeneca, SAP and Sanofi. It’s a well-chosen mix, because the GRANOLAS have turned in an above-average performance since they got their nickname from the Wall Street institution. Based on an equal weighting, the eleven stocks have climbed 48% since April 2020, outperforming the STOXX Europe 50 by around five percentage points. The highest achievers over this period have been the LVMH and Novo Nordisk shares, each surging by a little over 150%, while Roche participation certificates bring up the rear with a fall of one fifth.
“The GRANOLAS may not all perform well, but generally have some growth and stability in earnings and dividend yields are attractive,” said the statement from Goldman Sachs when the top eleven stocks were introduced three years ago. Looking back, it is clear that the experts were right: two of the eleven stocks, Roche and GSK, are currently in negative territory, but both are still returning above-average dividend yields of 3.5% or more. What is more, a few days ago dividend aristocrat Roche announced that it would raise its payout yet again, making it the 37th increase in a row. Meanwhile, the GSK share has turned the corner this year, climbing 5% since New Year. All in all, then, the selection has, as already indicated, performed better than the market as a whole and hence demonstrated its considerable quality.
Source: Refinitiv