ANNE ASHWORTH looks at investment opportunities in the UK and Europe

Looking for a new strategy to give your investments a crunchy boost? The answer may be found in two favorite cereals.

The ‘Magnificent Seven’ technology stocks dominate the news, but professionals have quietly acquired stakes in the ‘Granolas’: eleven companies from the UK and continental Europe.

They consist of GSK, Roche, ASML, Nestle, Novartis, Novo Nordisk, L’Oreal, LVMH, AstraZeneca, SAP and Sanofi.

This list of companies, compiled earlier this year by US investment bank Goldman Sachs, actually includes ‘Grannnollass’.

But let’s not be picky. As Sharon Bell, the bank’s strategist, puts it, these groups have “good growth, extremely good balance sheets and offer attractive dividends.”

They are multinationals that are not dependent on their domestic economy, but do benefit from lower interest rates in their home countries.

Granola cereal combines honey, maple syrup, nuts, oats and seeds. Honey and nuts are also among the ingredients in Nestlé’s Cheerios cereal, the name given to a group of smaller European companies that are also “culturally diverse” – that is, multinational corporations.

Coined by Paras Anand, Chief Investment Officer of Artemis, this new acronym is based on analysis that identifies companies with the most attractive fundamentals at the best prices.

The companies concerned are: Coface, H Lundbeck, Evonik, Eramet, Repsol, Indra Sistemas, OTP Bank and SAF Holland.

Cereal of any kind may not be your way to start the day, but a combination of Granolas and Cheerios will give you exposure to different industries.

But diversification should limit your risk.

PHARMACEUTICS

The global rise in healthcare spending is good news for businesses, but the sector still poses risks as drug development is expensive and failure rates are high.

But this challenge is likely to inspire even more innovation, meaning pharmaceutical groups are an interesting investment.

Among the Granolas are the British giants: AstraZeneca, the £216bn group which produces 13 major medicines including the chemotherapy treatment Enhertu.

Shares have risen 590 percent since CEO Pascal Soriot took over in 2012, but analysts still recommend buying the company.

Analysts are also confident about the prospects of GSK, formerly GlaxoSmithKline, which is valued at £64.9bn. The company’s best-sellers include vaccines and HIV drugs.

The Granolas also include two Swiss pharmaceutical companies.

Shares in Novartis, which makes the cardiovascular drug Entresto, have risen 18 percent this year to 100 Swiss francs (£89.28). The breast cancer drug Herceptin is a Roche product, but the company is poised to enter the booming market for obesity treatments. The shares have risen 16 percent since January to 283 Swiss francs (£252.69).

Denmark’s Novo Nordisk currently dominates the weight-loss market with its injectables Ozempic and Wegovy. It now faces increased competition from Eli Lilly’s obesity blockbuster Mounjaro. But its shares, which trade at 912 kronor (£65.96), are still rated ‘buy’.

H Lundbeck is a much lesser-known Danish company, but has earned a place among the Cheerios thanks to its expertise in neurological and psychiatric disorders.

Since the start of the year, shares have risen 40 percent to 46.28 crowns (£3.35), with one analyst expecting them to rise to 55 crowns (£3.98).

France’s leading pharmaceutical player Sanofi, known for its asthma and eczema treatment Dupixent, is the world’s largest vaccine maker. A majority of analysts rate the shares, currently at €100.34 (£85), as ‘buy’.

TECHNOLOGY

ASML, the Dutch group that makes equipment for microchip production, is seen as Europe’s “outstanding AI winner”, and its shares are up more than 1,000 percent compared to a decade ago.

This Granola stock was sucked into the short-lived tech stock frenzy this month. But analysts say this fall is a chance to buy shares, which are trading at €818.80 (£693.64). The average price target is €1,068 (£904.75).

Stonehage Fleming Global Best Ideas Equity fund manager Gerrit Smith says ASML is ready to seize the opportunity to reverse the decline in chip manufacturing in the West. He says: ‘From a global geopolitical perspective, this situation needs to be addressed. Fortunately, the US government is providing $280bn (£212bn) to create more capacity.’

Shares in SAP, the German software giant, have risen 40 percent this year to €195.62 (£165.81). Analysts at Barclays raised their price target to €230 (£194.84).

Indra Sistemas, a Spanish group, provides IT services to the air traffic control, defense and transportation industries.

Major shareholders include Spain’s sovereign wealth fund and US bank JP Morgan, two reasons it has joined the Cheerios. Shares, now at €16.71 (£14.16), are tipped to reach €23 (£19.48), with some analysts predicting €29 (£24.57).

BEAUTY, FOOD AND LUXURY

Chinese consumers’ reluctance to spend big on beauty products and handbags is hurting shares of Granola – L’Oréal, the world’s largest cosmetics group, and LVMH, the luxury goods giant.

As a result, L’Oréal shares have fallen 12 percent since January to €394.40 (£334.30), while LVMH is down 7 percent at €681.1 (£577.30).

However, analysts are confident that demand for LVMH accessories and L’Oréal lipsticks will return.

Reasons to be optimistic include sales growth at Sephora, LVMH’s beauty chain and L’Oréal’s acquisition of Galderma.

The company’s neuromodulator injections (also known as Botox) are still in high demand.

Shares in Nestle have fallen 8 percent this year to 89.54 Swiss francs (£79.88). The granola group’s 2,000 brands include Kitkats, Smarties, Purina pet food and Nesquik, but consumers are switching to cheaper brands.

Analysts have given the stock a ‘hold’ rating, although they are still targeting a price of 100 Swiss francs and hope that new CEO Laurent Freixe will reverse the decline.

FINANCIAL SERVICES

Banks and other financial institutions don’t appear in Granolas, but they are an important part of Cheerios.

Coface, a French company, is one of the world’s largest credit insurers. Its shares have risen 23 percent this year to €14.57 (£12.35), but some analysts predict it could rise as high as €17 (£14.40).

OTP Bank is listed in Hungary, but is one of the fastest growing banks in Eastern and Central Europe. Analysts are targeting 21,240.69 forints (£45.74), up from 17,695.00 (£38.10).

AUTOMOTIVE, CHEMICALS, OIL AND MINING

French miner Eramet specializes in nickel, a raw material essential for the production of electric vehicles.

Manganese, another specialty, is less sought after due to declining steel sales in China.

Shares are trading at €72 (£61.3). Analysts are optimistic, giving Eramet a ‘buy’ rating with an average price target of €152 (£128.77).

Evonik produces methionine, a component of animal feed. The German company is also a major sponsor of the Borussia Dortmund football club.

Analysts have set an average price target of €22 (£18.64) for the shares, which equates to €19.63 (£16.63).

Repsol, the Spanish oil and gas group, is active in drilling, exploration and extraction activities around the world, but is also moving to low-carbon energy sources.

In light of this, Paras Anand considers it a “very attractive valuation” at €12 (£10.17). The average target price is €17 (£14.40).

Anand also argues that shares in German automotive supplier SAF-Holland represent an “attractive valuation”.

The price has risen 18 percent so far this year to €17.90 (£15.16), but analysts expect the price to rise to €25 (£21.18) soon.

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