The Covid pandemic, the war in Ukraine, questions about transatlantic relations... "There is clearly a growing awareness of the need for European sovereignty," said Thomas Zlowodzki, head of equity strategy at Oddo BHF, at a press lunch held at its headquarters on Friday, October 3.

He says that European sovereignty has indeed become an economic and security imperative, with profound implications for investors. "Europe has realized that it must take greater responsibility for its defense, secure its supplies and build champions in critical sectors."

A doubled European financing plan

The bank reports that the issue of EU sovereignty has not escaped the attention of EU politicians, as evidenced by the 2028-2034 multiannual financing plan, which has been increased to €2 trillion, double the previous amount, and which focuses on energy, digital technology, research, and defense. "Even though the European Union is a slow-moving beast due to its size, there are still some fairly positive signs," Thomas Zlowodzki notes.

Member states, starting with Germany and France, are multiplying national measures, whether it be the France 2030 plan or the special German fund of €100bn to modernize its army.

Five pillars for investing in sovereignty

In this context, the financial sector is expected to play an increasingly important role, with the emergence of thematic funds and the mobilization of private capital around strategic projects. With this in mind, Oddo BHF has broken down the theme of sovereignty into five pillars:

  • Military,
  • Digital,
  • Energy and raw materials,
  • Industrial infrastructure,
  • Health and food.

In all, the bank has identified 127 listed stocks that fit the sovereignty theme, including "7 magnificent" companies, presented as "undisputed leaders in sovereignty," and "20 rising stars," smaller companies with strong growth potential.

The "Magnificent Seven" champions of sovereignty

The "Magnificent Seven" form the core of Oddo BHF's sovereignty portfolio. They include Rheinmetall, the German defense giant; Thales, the French pillar of security systems and satellites; and ASML, a key player in semiconductors and the world's only supplier of certain lithography technologies.

Alongside them are Schneider Electric, a specialist in energy efficiency and industrial automation; Siemens Energy, committed to energy transition and green electricity production; and SAP, a European heavyweight in management software and artificial intelligence applied to businesses. More surprisingly, Lonza, a Swiss company positioned in pharmaceutical bioproduction, is also included.

These companies share a critical mass, recognized technological expertise, and a strong contribution to European indices. According to data from Oddo BHF, they are expected to post average annual EPS growth of 24% between 2024 and 2027. Since February 2024, the basket of these seven stocks has already risen by 57%, demonstrating investors' growing interest in this theme, the bank points out.

The "rising stars": the future pillars

Alongside these established champions, Oddo BHF highlights twenty smaller stocks, presented as "rising stars," capable of becoming the pillars of sovereignty tomorrow. Their expected earnings growth reaches 44% p.a. over 2024-2027, an even faster pace, but driven by a riskier profile.

For Oddo BHF, European sovereignty is thus emerging as the new guiding principle for investment, at the crossroads of security, technology, and energy transition.