Abrdn: Whose stocks will dominate in 2024

What the banks are missing

What escapes banks' attention is the geographic diversity of European corporate earnings, which is more pronounced than in the U.S. market.

In addition, a wider range of sectoral returns are represented in Europe, unlike in the U.S., where technology stocks have a disproportionate impact on the market.

In addition, a phase of geopolitical stability may attract investors to Europe given its closer link to global economic growth compared to the US.

The strategy involves investing in companies that can generate positive and sustainable returns over a long period of time.

Europe for investors

Considering Europe as an investment target requires certain conditions to be met.

First, current earnings expectations must justify valuations that outperform other global stock markets.

Second, to attract investors, European companies must demonstrate superior and sustained earnings growth.

The third aspect involves the absence of the political and economic problems that have hindered international investment over the past decade.

Finally, sustained stability characterized by profitability and growth is necessary for Europe to become attractive to investors again.

Combining these elements with a thoughtful portfolio allows European equities to compete with any other global stock over the long term.

Long-term opportunities

Long-term opportunities lie across Europe, notable sectors include industrials, technology, healthcare, luxury goods, specialty chemicals and consumer staples. Many European companies are strategically positioned to capitalize on rising consumer spending in emerging markets.

Four companies with great prospects

ASML stands out because it specializes in the design, manufacture and sale of semiconductor manufacturing equipment. With a monopoly on the equipment needed to manufacture advanced chips, especially in the artificial intelligence sector, ASML has pricing power, a robust growth outlook and the ability to generate attractive returns on capital.

In the pharmaceutical sector, Novo Nordisk is a leader in the treatment of diabetes, offering insulin delivery systems and other drugs. The successful relaunch of the renowned obesity drug Wegovy provides the company with significant future growth. With deep scientific expertise and high barriers to entry, Novo Nordisk maintains a strong market position, setting the stage for potential double-digit revenue growth.

For those interested in luxury goods, there's LVMH. The French conglomerate owns such world-famous brands as Moet, Louis Vuitton and Dior. There are no signs of deteriorating operating performance, aided by factors such as pricing power driven by best-in-class brands and unwavering demand.

Finally, cosmetics giant L'Oréal boasts one of the strongest business models in Europe. The company's successful transition to online sales reinforces its dominant position, and its valuation remains reasonable given its long-term growth prospects. As with LVMH, L'Oréal's focus on growing wealth in emerging markets could be a key driver of its profitability.