Quarterly Outlook
Equity outlook: The high cost of global fragmentation for US portfolios
Charu Chanana
Chief Investment Strategist
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Get to know Europe’s top stocks
Søren Otto Simonsen
Senior Investment Editor
Summary: While the European stock market is as intertwined in the global economy as any, it provides investment opportunities that can be difficult to find elsewhere. And while the US indices become increasingly tech-heavy, Europe offers a more diversified investment landscape. To highlight some of the European possibilities, we have outlined the best performing stocks over a 5-year period of the massive Euro STOXX 600 index with a market cap of +5 billion euro on the first date of measurement.
The European stock market at a glance
With a bit of good grace, you could wedge in the argument that the European stock market is the oldest exchange we have. At least it is pretty widely considered that the Amsterdam Stock Exchange, with roots back to the 1600s, is the oldest modern stock trading venue.
Whether the European stock exchange's status as the old geezer has anything to do with it, the Euro STOXX 600 index offers a pretty well-diversified group of companies covering all of the 11 so-called GICS sectors. At the time of writing, Financials make up the biggest proportion of the index, covering a bit more than 18%. Industrials, Health Care, Consumer Staples, and Consumer Discretionary round out the top five, while Real Estate is the smallest with 1.3%.
This diversification is worth noting, especially in light of increasing concentration risk in the major US indices, which Peter Garnry, our Head of Equity Strategy, has written about on multiple occasions. Here it is tech stocks that make up an increasingly large proportion of the indices, meaning that the risks that tech stock faces are also prevalent when investing in the indices.
The Euro STOXX 600 index has enjoyed the same positive performance as most indices across the globe have. As such, it has climbed around 40% from December 2018 to December 2023. Comparatively, indices like e.g. the S&P 500 and the Nasdaq has had higher returns over the five-year period, but that is in large part due to the growing tech concentration mentioned above, which also comes with specific risks.
You can gain exposure to the index through products such as the iShares STOXX Europe 600 UCITS ETF, the Lyxor Core STOXX 600 ETF and the BNP Paribas Easy Stoxx Europe 600 UCITS ETF.
5-year performance: Europe’s largest companies are formed
Since 2019, the 20 best performing stocks have all returned more than 180%, with Novo Nordisk as the best performing with 433%. This has also meant that Novo Nordisk has become Europe’s most valuable company in terms of market cap. The second most valuable company, interestingly, is the 20th best performing, LVMH. ASML, which has the second best performance, has squeezed itself in as the fourth most valuable company in the region, just behind Nestlé, which, with a 5-year performance of 70%, doesn’t make the cut for this list.
The 20 top performers come from 10 different countries. Four of those are represented with three companies, one of which, we are proud to tell you, is Denmark (where Saxo is also headquartered). The others are the UK, France, and Switzerland. Italy and the Netherlands are represented with two companies, while Germany, Sweden, Ireland, and Belgium all have one on the list.
Sources: Saxo, Bloomberg and ChatGPT
Performance is calculated based on the following:
STOXX 600 index: price on the last day of the month from December 2018 - December 2023
STOXX 600 individual stock performance: Price on January 1, 2019 - price on January 9, 2024.
ETFs mentioned here are chosen based on Morningstar rating and last three month's popularity in SaxoTraderGo with Key Information Documents.
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