If you’re one to follow market headlines, you’ve likely heard of the Magnificent Seven stocks (including US companies Apple, Alphabet, Amazon, Microsoft, Meta, Nvidia and Tesla) which aptly earned their title after logging an eye watering 111% average return in 2023 ^[1]. But are you familiar with Europe’s own high-flying basket of stocks dubbed “The Granolas”? The Granolas are comprised of GSK, Roche, ASML, Nestle, Novartis, Novo Nordisk, L’Oreal, LVMH, AstraZeneca, SAP and Sanofi and have accounted for a 103% cumulative total return since 2021 ^[2].  

Aside from both sharing a headline grabbing nickname designed to capitalize on the performance buzz, these two baskets of stocks could not be more different. Where the Magnificent Seven is made up entirely of technology-driven stocks (if you’re splitting hairs, Morningstar classifies only Microsoft, Apple and Nvidia as true tech stocks, Amazon and Tesla as consumer cyclical stocks, and Alphabet and Meta as communications services stocks), The Granolas is comprised of a mix of sectors ranging from consumer staples, healthcare, and only one tech-focused stock: ASML, a semiconductor supplier. Another glaring difference between the two is the value premium opportunity. In short, value premium is the difference between high book-to-market value companies (companies with strong financials trading at relatively low prices) versus low book-to-market value companies. Within the Magnificent Seven, Alphabet is the only company trading at a slight value premium (aka trading “on sale”). Within The Granolas, GSK, Nestle, AstraZeneca, Sanofi, Roche, LVMH and Novartis are all trading at a value premium.  

If you further peel the onion on the Magnificent Seven, be prepared for your eyes to continue watering as six of the seven companies have trillion-dollar market values (Tesla trails at $630 billion). In contrast, the highest valued company in The Granolas is Novo Nordisk, the maker of Ozempic, at $555 billion [2]. In comparison to the Magnificent Seven, The Granolas look plain vanilla (I’m sorry if you’re getting hungry) with their relatively low volatility and strong financials, but they are still only 11 concentrated stocks out of the over 55,000 companies listed worldwide.  

And while it is interesting—at times dizzying— to track performance on a flashy basket of stocks, the reality is that there will always be an eye-catching, runaway band of companies in the headlines. Before the Magnificent Seven, there was FAANG and GAFM; and after The Granolas, there will be another quippy phrase for highfliers in a particular sector or country. As such, we continue to beat the drum on diversification; according to a Dimensional study that tracked the annualized returns of the top ten largest US stocks from 1927 through December 2022, only 0.6% outperformed the market over the 3-year period following their rise to the top ten ranking, further dropping to -0.9% over the next 5 years and -1.5% in the 10 years following ^[3].  

The moral of the story? I have a two: 1) markets are volatile and finicky, but a good Planner can help keep your asset allocation—and overall life plan—on track, despite the noise of headlines, and 2) I’m still a sucker for a good acronym. 

[1] What Are the Magnificent 7 Stocks? | Kiplinger

[2] Magnificent Seven vs. the ‘Granolas’: How Does Europe’s Version Stack Up? | Morningstar 

[3] Magnificent 7 Outperformance May Not Continue (dimensional.com) 

Apella Capital, LLC (“Apella”), DBA Apella Wealth is an investment advisory firm registered with the Securities and Exchange Commission. The firm only transacts business in states where it is properly registered or excluded or exempt from registration requirements. Registration of an investment adviser does not imply any specific level of skill or training and does not constitute an endorsement of the firm by the Commission. Apella Wealth provides this communication as a matter of general information. Any data or statistics quoted are from sources believed to be reliable but cannot be guaranteed or warranted.  

Diversification seeks to reduce volatility by spreading your investment dollars into various asset classes to add balance to your portfolio. Using this methodology, however, does not guarantee a profit or protection from loss in a declining market.