SAP - Forget the Magnificent 7: GRANOLAS Stocks Are up Big and Are Far Less Risky
2024-02-23 16:30:00 ET
There continues to be concern about how much the “Magnificent 7” stocks are taking up the S&P 500 . These companies have led the charge with the S&P 500’s growth over the last year. While shares are up 25% in the last year, there is a bit of a caveat to that.
That caveat is that without the Magnificent 7 stocks, the growth for the S&P 500 is quite a lot lower. That’s because most of the market hasn’t grown by double digits. These stocks are now worth more than even many of the G20 countries!
What’s the problem?
The main problem is that if these companies start to slump in share price, they could trigger a huge drop in the market. In fact, that could be likely in the near future. Investors have been pouring cash into these tech stocks, seeing shares rise higher and higher. But the tides could already be turning.
Part of that comes from earnings. Some have counted on earnings being above and beyond estimates. And if that doesn’t happen, investors have taken out their returns. This may continue to happen as we see interest rates remain elevated.
That’s why instead of looking at the Magnificent 7, it might be time to consider the GRANOLAS. These are companies that Goldman Sachs termed back in 2020. And instead of focusing on American companies, it provides exposure to European stocks instead.
What are GRANOLAS stocks?
The companies that take up GRANOLAS are GSK , Roche , ASML Holding N.V. , Nestlé , Novartis , Novo Nordisk , L’Oreal , LVMH Moët Hennessy – Louis Vuitton, Société Européenne , AstraZeneca , SAP ( NYSE:SAP ), and Sanofi .
Yes, it’s a mouthful but a mouthful of delicious growth. Since January 2021, these companies have been able to keep right up with the Magnificent 7. In fact, not only have they kept up, but they’ve been able to see a lot less volatility and fewer drops in share price.
Furthermore, these companies provide a cheaper share price for investors. Most trade around 20 times earnings, compared to 30 times earnings in the Magnificent 7. And, keep in mind, that’s while trading in the more expensive European market.
Consider them now
Another benefit is these are companies you can always buy, no matter market conditions. Each has seen consistent growth even in difficult economic conditions. That comes from strong growth, sure, but also predictable growth as well.
Now, of course, it can be confusing to invest in all these stocks. But overall, these companies have seen strong double-digit growth. What’s more, unfortunately, there isn’t one exchange-traded fund that invests in them all at this point.
But take it this way. By investing in these companies, you’re gaining global exposure beyond Canada and the United States. You’re also getting away from the volatility of the Magnificent 7. I’d say that’s a huge win — one that will add superior long-term passive income to your portfolio.
The post Forget the Magnificent 7: “GRANOLAS” Stocks Are up Big and Are Far Less Risky appeared first on The Motley Fool Canada .
Fool contributor Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool recommends ASML and Roche Ag. The Motley Fool has a disclosure policy .
2024