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European Growth Segment Hit by Novo Nordisk Decline

Meanwhile, on the value side, German automotive companies recovered in December

Fernando Luque 3 January, 2025 | 4:26PM
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European map under magnifying glass

December was a slightly negative month for European markets. The Morningstar Europe NR index declined by a small 0.4%, but with differences between markets: Italy and France advanced by 2.4% and 2.1%, respectively, while the UK market lost 2.1%. By country, Denmark was the hardest hit, losing a significant 11.1%.

Novo Nordisk’s Slump Hinders Growth

The share price of Novo Nordisk NOVO B, which fell 17.6% in December after disappointing anti-obesity drug data, is the cause for the decline.

The slump in the Danish pharmaceutical giant, which is the European stock with the biggest market capitalization, was largely responsible for the Large Growth style losing 1.0% in December, compared with a rise of 0.9% for the Large Value style. It also explains why the healthcare sector was one of the worst sectors, down 3.7%.

Another large-cap growth company that had a very negative December was Spain’s Inditex ITX, which lost 4.9%.

It wasn’t all bad news in December for the growth segment. Technology companies SAP SE SAP and ASML Holding ASML managed to regain 5.1% and 3.1%, respectively, but one of the biggest risers within growth companies was French luxury company Hermes International SA RMS which gained a significant 12.5% last month.

German Carmakers Recovered in December

On the Large Value side, December was the month of recovery for German automakers. BMW BMW and Volkswagen VOW were up 12.8% and 10.3%, respectively. It was also a good month for some of the big European banks such as HSBC Holdings HSBA, while Italian entities Intesa Sanpaolo ISP and UniCredit UCG each gained 6.5% and 5.9%, respectively.

Within this segment of the European market, some companies posted notable losses such as the two large London-listed basic materials companies, Rio Tinto RIO and Glencore GLEN, which gave up 3.8% and 6.5%, respectively.

A Positive Year for Growth Stocks

2024 highlights the large difference in performance between European value and growth companies. The Large Growth style, for example, gained 26.8% compared to a 12.0% rise for the Large Value style.

The only segment of our European Style Box to finish negative was Small Value, which ended the year down 0.8%.

Cyclical Consumption on the Rise and Real Estate on the Fall

At the sector level, the consumer cyclical sector, dominated by automakers and luxury companies, stood out in December with a 4.5% gain, followed by the technology sector, which posted a 4% gain.

However, if we look at the returns for the year as a whole, it was the financial sector that appreciated the most with a rise of 30.0%.

On the opposite side, not only did the healthcare sector perform poorly in December (due to Novo Nordisk), with a fall of 3.7%, but the real estate sector declined also, losing 4.7% over the same period. This sector was one of the two that ended the year in negative territory (-0.6%). The other was the energy sector, which lost 1.2%.

Large Value Remains Undervalued, While Technology is Overvalued

In terms of valuations, the Large Value segment ended the year with a Price/Fair Value of 0.84, which means it is undervalued by 16%. In contrast, the Large Growth segment trades at a premium of 13%.

By sector, the only European sector to show an overvaluation is the technology sector, which trades at a 6% premium. At the end of December, the cheapest sectors were the communications sector (Price/Fair Value of 0.79) and real estate (Price/Fair Value of 0.80).


The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar's editorial policies.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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Fernando Luque

Fernando Luque  is Senior Financial Editor at Morningstar Spain 

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