European markets managed to end November in positive territory: the Morningstar Europe NR index rose by a modest 1.2% in euro terms over the period, with all segments of the Style Box in positive territory.
In general the growth style performed better than the value style, as attested to by the fact that the three top performing segments in November were Large Growth (2.7%), Mid Growth (3.9%) and Small Growth (4.9%).
European small companies (like in the US) also did better than large companies. Large Blend and Large Value were up just 0.1% and 0.2%, respectively.
Tech Stocks Stand Out
Within the Large Growth style, Dutch ASML Holding NV (ASML), up 6.0%, was the largest contributor to the positive performance of this market segment. The other major European technology company, Germany’s SAP (SAP), also had a good November, with a gain of 4.7%. Not surprisingly, therefore, the technology sector was the best performer in that period, up 3.4%.
As for the Large Value style, its relative poor performance this past month is largely due to the declines of two large French stocks, BNP Paribas (BNP) and TotalEnergies (TTE), which fell 9.7% and 4.2% respectively. German auto stocks also did not help the large value company segment perform better: Porsche (P911) fell 8.6%, Volkswagen (VOW3) by 9.2% and Mercedes-Benz Group (MBG) by 4.9%.
Large British companies came to the rescue of the value style to avoid a more negative result: British American Tobacco (BATS) gained 12.7% in euros, HSBC Holdings (HSBA) rose 5.7% and Barclays (BARC) by 12.9%. In fact, the Morningstar UK NR index rallied 2.8% in euro terms in November, well ahead of the European index as a whole. In particular, the French index, the Morningstar France NR, lost 1.7% over the same period.
The Large Blend segment, meanwhile, was hit hard by declines in two of the largest Swiss stocks, Nestlé (NESN) and Roche Holding (ROG) which lost 5.4% and 3.8% in euros respectively. The other major Swiss company, Novartis (NOVN) performed flat in November, with a token gain of 0.3% in euros.
At the sector level, apart from the already mentioned good performance of the technology companies, the financial sector stood out with a 2.8% increase thanks to the good performance not only of HSBC Holding but also of the Swiss companies Zurich Insurance Group (ZURN) and UBS Group (UBSG) which were up 10.3% and 8.3% in euros respectively. These rises offset declines in the French and Italian banks. Not only did BNP Paribas fall sharply but also Crédit Agricole (ACA), down 10.1% and while on the Italian side UniCredit (UCG) dropped 8.3%.
The worst-performing sector in November was Basic Materials, which fell 1.6% due to two of the largest companies in the sector, Air Liquide (AI) and Glencore (GLEN) which dropped 4.5% and 5.0% in euros.
Large Growth Remains Expensive
In terms of valuations, the trend has not changed. Among the large European companies, growth companies continue to look expensive to us. Within this style, the two largest companies by market capitalization, Novo Nordisk (NOVO B) and SAP trade at a premium of 26% and 50% respectively.
The large value companies are much cheaper overall. The two largest companies within this segment, the UK’s Shell (SHELL) and HSBC Holdings trade at a discount of 13% and 17% respectively.
The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar's editorial policies.