Europe's stock market giants – investing in the GRANOLAS, plus 3 share ideas

The only tech name out of the GRANOLAS is Netherlands-based ASML. It’s the global leader in lithography machines, a vital part of producing the microchips that power electronic devices.

ASML’s the sole producer of the most advanced type of lithography machine, called High-NA Extreme Ultraviolet (EUV) lithography. It took over two decades to research, develop and commercialise the technology involved in EUV – which is now a very wide moat for any competitor to try and cross.

With the Artificial Intelligence (AI) boom fuelling demand for the most powerful kind of chips, ASML finds itself essentially selling the picks and shovels in an AI gold rush. As a result, the group saw its revenue and operating profit rise at 24% and 40% respectively in the fourth quarter. There’s room for profitability to improve further as services and upgrades for the installed base of machines become a more important part of the picture.

Recent geopolitical developments could pose some challenges for ASML though. The group’s having to navigate restrictions on the sale of its technology to China, which accounted for around 40% of sales last year. With political relations continuing to sour, there could be more restrictions on exports ahead, which would weigh on performance somewhat.

There’s around €36bn of orders in the pipeline, which helps give some revenue visibility in the near term. The group is extremely cash-generative, which helps it self-fund research and development of the next generation of chip-making tech. There’s also enough cash left over to fund share buybacks and a modest 1.3% prospective dividend yield. As always, shareholder returns are never guaranteed.

The valuation has come down sharply over the last year due to uncertainty over trade restrictions and the expansion plans of its end customers. But given ASML's monopoly over the high-end space, it should be less exposed to potential future tariffs. Trading at 22.9 times forward earnings, this could be an attractive opportunity for potential investors. But further volatility is to be expected, especially in the near term.

LVMH is Europe’s luxury powerhouse. It’s a conglomerate of high-quality names like Louis Vuitton, Christian Dior, Givenchy, and TAG Heuer to name a few. Simply put, it offers unparalleled scale and breadth in the luxury sector.

2025 has got off to a soft start, with sales across all of its major divisions falling short of market expectations. Bumper sales in the far east last year are making for some tough comparable numbers, and that’s likely to remain the case in the near term.

Looking ahead, the group’s shifting focus from driving volume growth, and instead tapping into its brand strength to increase prices and drive sales higher.

Many of LVMH’s goods are status symbols, and the group’s mega-wealthy customer base tends to be undeterred by sky-high prices. These high prices also help to keep operating margins healthy and mean there’s plenty of cash pumping through the business to support the current 2.6% forward dividend yield. But remember, no dividends are guaranteed.

Group CEO Bernard Arnoult has been at the helm for the better part of 40 years. He’s the largest shareholder and his family owns 48% of the shares, which probably explains the focus on long-term success.

On the flip side, this raises questions about succession plans. When the day comes for him to step down, there’s likely to be some short-term turbulence. And longer term, there’s no guarantee that his replacement will have the same level of success.

Despite having a large exposure to the US and China, LVMH saw no impact from tariffs on demand in March. While that’s not guaranteed to continue, a lot of its US sales are already manufactured in the country, and the group says it has scope to up production here to soften the blow on future sales. The direct impact of tariffs is limited in our view, but if there is a global recession driven by US tariff policies, we could see demand weaken.

The valuation’s come down a lot in recent months, and now sits some way below the long-run average, at 18.9 times next year’s expected earnings. That’s middle of the pack relative to peers, which we believe suggests not all of the group’s strengths are priced in. However, there are no guarantees and share prices can go down as well as up.

Given the number of pharmaceutical companies that make up the GRANOLAS, we’d be remiss not to dive into one.

AstraZeneca is a pharmaceutical giant at the cutting-edge of drug development. The group finished 2024 in great health, growing both revenue and profits at 25% and 21% respectively.

There are lofty ambitions to grow revenue from $54bn in 2024 to $80bn by 2030. We reckon that’s achievable, but it won’t be without some challenges. Progress so far has been good and there’s a strong pipeline of potential new products – an area where Astra’s hit rate in the clinic has been impressive.

2025 has already seen a string of regulatory approvals for the group’s cancer therapies. After approval, sales of cancer drugs can build incrementally for many years as patient access improves, approvals are gained in new markets, and clinical trials prove their efficacy in additional diseases. The high-value nature of the group’s products has also improved profitability and there’s scope for more to come.

Despite the strong track-record, Astra still has to contend with the substantial risks that come with drug discovery. Even after heavy investment, plenty of drugs never make it to market, so investors need to be prepared for disappointments.

There’s also the impact of tariffs to consider. With the US being Astra’s biggest market, tariffs on its products entering the country could seriously disrupt pricing. Trump’s goal is to push foreign companies to move production to the US, boosting jobs. But relocating would take time. Given the vital nature of pharmaceuticals in treating serious illnesses, we see scope for them to receive more favourable tariff treatment than many other industries. Of course, there’s no certainty things play out this way.

The balance sheet’s in good shape, and the group’s generating strong cash flows from its existing portfolio of medicines. That’s helping to support a forward dividend yield of 2.5% – though no shareholder returns are guaranteed.

The valuation’s come down in recent months due to tariff fears and the launch of an investigation into the business practices of current and former employees in China. Initial estimates suggest a liability for the latter capped at around $5mn. If that holds true, and Astra executes its strategy well, then there’s scope for the valuation to rise back up towards its long-term average. Although share prices can go down as well as up.