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Check out this map of Europe's biggest stocks

Sunniva Kolostyak  |  27 Apr 2022Text size  Decrease  Increase  |  
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Australian investors tend to know most about local companies. We know all our biggest banks, our mining giants, and, following a period of rock bottom interest rates, tech companies like Afterpay and WiseTech have gone from small startups to household names.

Few of us, however, would know what the equivalent to our large-caps would be in other regions. Who reigns in Austria? Which of its companies are undervalued? And what are their market caps?

Well, look no further. We have visualised this in one handy map. It enables you to search across Europe for the top stocks by market cap size, alongside Morningstar Star Rating, if they have one.

The UK’s biggest three stocks are AstraZeneca (AZN), Shell (SHEL) and HSBC (HSBA). The former two are of similar market cap size, at around €180 billion, while the latter hovers at €126 billion – for ease, we have converted all valuations to Euros.

Of the three stocks, however, HSBC is currently trading at a slight discount, with a rating of four stars. AstraZeneca and Shell, on the other hand, are considered to be fairly valued.

Crossing the channel to France, we see that the country's top three stocks are currently overvalued. The biggest, two-Star LVMH (MC), has a market cap of a whopping €338 billion, significantly higher than second-largest stock L’Oreal (OR), and more than twice that of the third-largest company, Hermes (RMS).

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Those two, however, are both significantly overvalued, trading in one-star territory after seeing the benefits from the pandemic, which sent all three stocks soaring. Luxury brands were positively affected by people's increased savings, while the global consumption of beauty products keeps on rising.

We also find overvalued companies in Scandinavia, where Danish Novo Nordisk (NOVO B), the biggest company in the region, and Norwegian Equinor (EQNR) each have two-star ratings. However, Sweden's Atlas Copco (ATCO A) is the most overvalued, and currently trades in one-star territory.

Sector Differences

The top stocks for each region are also representative of which sectors rule across Europe.

For its part, the UK is a largely cyclical market, with sectors like financial services taking up large parts of the index. The Nordics are categorised as mainly sensitive countries, being big on energy and industrials.

This categorisation provides a handy guide to the weighting of the types of stock in a market. It also helps clarify whether there is any competition, where opportunities lie, and which countries are likely to be impacted by economic booms and busts.

Both Spain and Italy are largely cyclical markets too, and are pretty much ruled by financial services stocks. However, neither of the countries’ biggest stocks belongs in that category – and both have star ratings of five.

Spanish Industria De Diseno Textil (ITX) is the number-one apparel company by revenue in Western Europe and globally, and owns fast-fashion brand Zara. Morningstar did lower its fair value estimate due to the disruption caused by Russia’s invasion of Ukraine, but analysts believe the share price decline more than reflects the current risks.

Italian energy company Enel (ENEL) also has five stars. The company has had an uphill battle since 2008, but Morningstar analysts believe its fundamentals are not priced in, and its renewable business has limited exposure to Russia. The company also recently announced a 6% dividend hike per share this year.

Germany is another cyclical market. Its top stocks are: SAP (SAP), Siemens (SIE) and Volkswagen (VOW). The first and last of these is currently trading in four-star territory.

And finally: the Netherlands. The Dutch market is slightly less sensitive to business cycles due to its techy constituents, and there are some deals to be had among its largest stocks too. Semiconductor company ASML (ASML) is slightly undervalued with a four-star rating, but payments provider Adyen (ADYEN) is trading within its fair value estimate.

is data journalist for Morningstar.co.uk

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