GRANOLAS may give investors a bite into European market leaders

Updated: May 12, 2020 12:48 PM

With steady cash flow, the dividend could make these companies winners.

GRANOLAS companies have been identified by the Goldman Sachs team which has been scouring for companies that can, potentially, outperform the markets.

It has nothing to do with the munching bar you know. But it is called GRANOLAS. If you eat them at breakfast, it still is not GRANOLAS. For equity market investors, though, it is certainly food for thought.

GlaxoSmithKline. Roche Holding. Nestle. L’Oréal. LVMH. Novartis. Novo Nordisk. ASML. AstraZeneca. SAP. Sanofi.

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These companies, leaders in their own right, make up the acronym GRANOLAS. Sticking to the fundamentals of business makes them attractive today.

GRANOLAS companies have been identified by the Goldman Sachs team which has been scouring for companies that can, potentially, outperform the markets at a time when uncertainty is ruling the markets. According to Goldman Sachs view, companies that have a strong balance sheet and a predictable cash flow, along with good dividends yields, could be outperformers.

Keeping those filters in mind, the Goldman Sachs team has identified 11 companies that have been given the name, GRANOLAS

GRANOLAS

New opportunities for investors

The opportunities for investors focused on European markets are changing. And so is the future of companies that are the bellwether for the European markets.

Goldman’s research suggests that over the last 2-3 days, all the top 10 companies from Europe were banks, energy, and telecom sectors. With the changing business and consumer preferences, none of the top 10 companies across the continent are now from these sectors.

Tech companies comprise 25 percent of the Dow for the US markets and enjoy unfettered attention from the big bulge investors. As it has turned out, European stocks do not enjoy the same attention. Goldman Sachs believes that, in these tough times, opportunity beckons.

Policy reaction from all the countries across Europe has not been consistent. Germany, Italy, and UK have announced a raft of measures for consumers and businesses, other economies appear to be losing out. Being with relatively defensive stocks could be a better opportunity.

Europe’s future leaders

Europe does not have the technology leaders that US investors enjoy. That is why Goldman Sachs chose to look beyond the tech sector and identify the companies. Not all the companies, as part of GRANOLAS, may beat the markets, the way tech stocks from the US did. But for investors looking for earnings stability, this could be a good option.

With banks having to cut interest rates, the Stoxx 600 Banks sectors have seen the highest number of cancellations of dividends across Europe. A number of companies in the travel and leisure, industrial goods & services, retail, personal & household goods, food & beverages, and other sectors are doing the same.

That is why the strategy team at Goldman Sachs believes that this is an era of low-interest rates and low nominal growth. The likelihood of winning stocks in such a market will come from those companies with a strong balance sheet, which are seen as defensive plays.

Names that stick

Tech investors are familiar with the name FAANG. They represent Facebook, Apple, Amazon, Netflix, and Google – the tech giants from the US which have dominated the market’s gain.

FAANG

The acronym was originally called FANG, coined by CNBC anchor Jim Cramer. It was later expanded as FAANG or FANG+. Each of these stocks are leaders in the global markets in their respective areas – Facebook for social networking, Apple as the biggest consumer brand, Amazon for e-commerce, Netflix for online loyalty and Google as the smartest data company.

Despite the disruption caused due to COVID-19, these companies continued to be the favorites for consumers and investors.

Favorites of investors

At the turn of the century, Goldman Sachs’ Jim O’Neill coined the term BRIC, an acronym for Brazil, Russia, India, and China. He said that these were emerging economies and could outpace others. Later, South Africa was added to the list and the acronym turned into BRICS. Since then, BRICS is now a commonly used term for investors and policymakers

Some may still ask, what’s in a name? For smart investors, it could mean money!

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