Financial News Agency, March 1 (Editor Xiaoxiang) Wall Street has always been good at "telling stories."
Recently, while the "magnificent 7" in the U.S. stock market is still hot, Wall Street has timely launched the concept of "granolas" in European stocks. The concept consists of 11 European stocks - GlaxoSmithKline, Roche, ASML, Nestlé, Novartis, Novo Nordisk, L'Oreal, LVMH, AstraZeneca, SAP and Sanofi. (Take the initials of each company's name, and share the same if repeated)
Although this concept was proposed by Goldman Sachs as early as 2020, today's "popularity" does not seem to be surprising.
According to Goldman Sachs, these "Eleven Knights" of European stocks accounted for 60% of the total increase in European stocks over the past year, even better than the "Big Seven" of U.S. stocks. Goldman Sachs analysts highlighted in a recent report that these 11 stocks exhibit qualities that can thrive in the current cycle, such as solid earnings growth, high and stable profit margins, and strong balance sheets.
This has also caused many global investors to have a "happy trouble" now: Should they invest in the "Big Seven" of US stocks or the "Eleven Knights" of European stocks?
However, American financial analyst and senior columnist Mark Hulbert has a different voice. He believes that a portfolio focused on these popular stocks may not be a good choice in the long run.
Overvalued
Hulbert points out that when these portfolio tags were created and increasingly mentioned, the only thing the individual stocks in these particular portfolios had in common: they had produced astonishing returns. And this, without exception, means that these stocks are highly valued, or even completely overvalued.
As you can see from the picture below, this is the current situation regardless of "granolas" or "magnificent 7".
hulbert said that while overvalued stocks may still become more expensive in the short term, they will almost certainly underperform the market on average over the long term. The law of gravity (the theory of return to value) will eventually win out, and when that happens, you can bet Wall Street will create a new class of blue chip stocks and give them a catchy name.
hulbert said, "Over the past decade, we have seen this playbook play out, with underperforming stocks being removed from a popular portfolio and a new portfolio consisting of outperforming stocks emerging. Remember fang? The group was popular for a few years before falling out of favor. It then evolved into faang, then faamg, and now mamaa or the 'Big Seven.'"
Thirty Years Hedong, Thirty Years Hexi
hulbert He said that popular stocks continue to withdraw from the ranks of stock market winners and are replaced by new winners. This is an inherent process in financial markets. The late Austrian economist Joseph Schumpeter called this the theory of "creative destruction" - every large-scale innovation eliminates old technologies and production systems and establishes new ones, insisting that this promotes economic development. an important by-product of innovation.
hulbert believes that if the "creative destruction" of the corporate world continues, then the "Big Seven" will eventually become less gorgeous, and "granolas" will become obsolete. Tomorrow's best will have little overlap with today's best.
hulbert cited a study by Research Affiliates, which focused on the performance of the 10 largest market capitalization stocks in the United States at the beginning of each decade since the 1980s and recorded the corresponding changes. Rob Arnott, founder and chairman of Research Affiliates, wants to know how many stocks will still be in the top ten by market capitalization at the end of each decade.
The result is: since 1980, an average of only two. In addition, the 10 largest market capitalization stocks at the beginning of each decade significantly underperformed the market over the next ten years.
Take Netflix, for example, one of the original members of the fang group. Over the past five years, the stock's annualized returns have lagged the S&P 500's by 3.8 percentage points, according to FactSet.Similarly, the recent performance of Tesla's stock price, one of the "Big Seven" members, has been very poor. Hulbert bet that it will soon be kicked out of the "Big Seven" - in the past three years, Tesla's performance has lagged behind the benchmark. S&P 500 index 15.2 percentage points.
hulbert finally said that the only way for to make money from Wall Street's hot stock stories is to know in advance which stocks will become hot stocks. And if you can't predict which stocks will be included in Wall Street's next special group, then the only way to ensure you own them is to invest in the entire market, preferably through low-cost large-cap index funds.
(Financial Associated Press Xiaoxiang)
