Citi names 'Super 7' global stocks similar to the Magnificent 7 — but cheaper

Published Thu, Feb 29 20246:15 PM EST

Citi has identified European stocks it says are similar to the high-flying " Magnificent Seven " U.S. technology stocks, but trade at cheaper valuations leaving more room for them to rise. The Wall Street bank pointed out that although mega-cap U.S. growth stocks like Nvidia have captured headlines with their stellar gains this year, the European stock market rally has been even more concentrated — or narrower — with a small number of stocks driving gains. Following in the footsteps of its U.S. counterparts, the pan-European Stoxx 600 stock index closed at a record-high close last week. "We introduce a group of European heavyweights, the 'Super 7', which have lagged the US Magnificent 7 but have similar fundamental characteristics," said Citi strategists led by Beata M. Manthey in a note to clients on Feb. 28. "These could be beneficiaries in a continued 'narrowing' environment." Citi strategists noted that the top five stock contributors in Europe were responsible for 45% of equity market gains so far this year. That is markedly higher than the typical figure of 25% seen historically, they said. By contrast, the 45% concentration level seen in U.S. equities year-to-date is more or less in line with the historical norm. .MAG7 .STOXX 1Y line The investment bank screened for large-cap European stocks with high-profit margins, solid earnings-per-share growth, and competitive advantages or "economic moats" — criteria that have helped drive the outperformance of U.S. mega-caps like Apple , Microsoft , Amazon , Tesla , Nvidia , Meta Platforms , and Google parent Alphabet . Citi's resulting Super Seven picks are Novo Nordisk , ASML , LVMH , SAP , Schneider Electric , Richemont and Ferrari . All of the stocks stocks also trade in the United States. Shares of weight-loss drug developer and Europe's most valuable company, Novo Nordisk , have risen more than 65% over the past 12 months. Similarly, chip equipment maker ASML is up nearly 50% over the same period. Despite the rally over the past year, Citi points out that as a group, the Super Seven have lagged the Magnificent Seven, with 70% less appreciation since early 2023, leaving more upside potential. Looking ahead, Citi said the Super Seven was well positioned to continue outperforming should current "narrow" market conditions persist, and cautioned against selling stocks on the basis of a narrow market leadership. The bank also said that cyclical stocks and broader market indexes have upside over the medium term if economic growth broadens out from the current narrow path. — CNBC's Charlotte Reed contributed reporting.