ASMLF - VGK Vs. QQQ: How Europe's 'GRANOLAS' Could Outperform The US 'Magnificent 7'

2024-04-16 14:16:55 ET

Summary

• Just as the "Magnificent 7" stocks lead returns and headlines in US markets, an 11 stock basket called "GRANOLAS" have been called Europe's growth leaders.
• Here I run a head-to-head comparison using the Magnificent 7 as a proxy for the Invesco QQQ ETF, and GRANOLAS as a proxy for leading Europe ETF "VGK".
• I find the Magnificent 7 more uniform in being expensive and high momentum, while the GRANOLAS show more dispersion and opportunities to pick individual names.

In many of the different stock markets around the world I look at, it is often just a small handful of stocks at the very top that drive all the returns. While I have long expected this rule of thumb to apply to smaller stock markets which only have a small number of stocks, and often only a single digit number of large caps, to begin with, in recent years this idea has also come to apply to two of the largest stock markets in the world: that of the United States, and even Europe when viewed as a single market. In the US, the current term for these market leading stocks is the " Magnificent 7 " or "Mag 7" for short, and this week I saw this article from European index provider STOXX comparing a basket of European stocks called "GRANOLAS" to the M7. The STOXX article points out that the "GRANOLAS" stocks make up only 21% of the STOXX Europe 600 Index ( STOXX ), but contributed 60% of the gains in the STOXX over the past year....

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