{"id":13271,"date":"2023-08-16T16:11:22","date_gmt":"2023-08-16T13:11:22","guid":{"rendered":"https:\/\/sifterfund.com\/?p=13271"},"modified":"2023-08-17T15:45:10","modified_gmt":"2023-08-17T12:45:10","slug":"novo-nordisk-is-an-excellent-example-of-a-quality-company-its-numerical-and-qualitative-criteria-are-exceptional","status":"publish","type":"post","link":"https:\/\/sifterfund.com\/en\/novo-nordisk-is-an-excellent-example-of-a-quality-company-its-numerical-and-qualitative-criteria-are-exceptional\/","title":{"rendered":"Novo Nordisk is an excellent example of a quality company \u2013 its numerical and qualitative criteria are exceptional"},"content":{"rendered":"\n

On August 8, 2023, the stock of the Danish pharmaceutical company, Novo Nordisk, rose by a remarkable 18% in a single day, a rare occurrence for a giant company with a market value of over 350 billion euros. Why has Novo Nordisk become the largest investment in the Sifter Fund?<\/p>\n\n\n\n

On August 8, 2023, Novo Nordisk announced<\/a> that its obesity treatment drug, Wegovy<\/strong>, reduced the risk of serious cardiovascular events, such as heart attacks, by 20% compared to the placebo group in the SELECT study.<\/p>\n\n\n\n

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This news caused Novo Nordisk’s stock to rise sharply by 18% in a single day.<\/p>\n<\/blockquote>\n\n\n\n

The Sifter Fund invested in Novo Nordisk<\/strong> in December 2020. Nearly three years later, in August 2023, the stock’s weight is 9% of the entire Sifter Fund’s portfolio, surpassing even Microsoft<\/strong>, which is one of our longest-standing investments.<\/p>\n\n\n\n

Several positive developments have occurred in Novo Nordisk’s business over the past three years, and the company’s stock price has offered nearly a 200% increase in euros (from 12\/2020 to 8\/2023) to Sifter\u2019s investors, dividends excluded.<\/p>\n\n\n\n

Novo Nordisk \u2013 Why did we invest in the company in 2020? <\/h2>\n\n\n\n

During the COVID-19 pandemic, Sifter’s research team conducted an intensive analysis of Novo Nordisk. We have often been careful of investing in pharmaceutical companies, as assessing their product portfolios can be complex. However, Novo Nordisk stood out due to its focused business strategy.<\/p>\n\n\n\n

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Novo’s operations are clearly focused around diabetes medications, and the company has an impressive history of innovation in diabetes treatment and money making power<\/a>.<\/p>\n<\/blockquote>\n\n\n\n

At the time of investment, Novo’s valuation was high, but quality companies are rarely available at a discount. Our conservative calculations were based on a modest 5-7% annual growth in the company’s core business. We also considered the potential of the company’s new obesity treatment drug Wegovy<\/strong>, but did not assign significant weight to this new growth business in our calculations, as the obesity treatment drug was not yet on the market.<\/p>\n\n\n\n

Novo Nordisk’s business is of exceptional quality, and this is reflected in its key figures <\/h2>\n\n\n\n

The company’s revenue has grown at an average rate of 10% over the last five years and has accelerated in recent years. Correspondingly, the company’s net income has been increasing at an average rate of 8% per year.<\/p>\n\n\n\n

<\/td>2017<\/strong><\/td>2018<\/strong><\/td>2019<\/strong><\/td>2020<\/strong><\/td>2021<\/strong><\/td>2022<\/strong><\/td>2023E<\/strong><\/td><\/tr>
Revenue (M\u20ac)<\/strong><\/td>15 015<\/td>15 004<\/td>16 343<\/td>17 030<\/td>18 932<\/td>23 786<\/td>30 058<\/em>*<\/td><\/tr>
Annual growth<\/em><\/td><\/td>-0,1 %<\/td>8,9 %<\/td>4,2 %<\/td>11,2 %<\/td>25,6 %<\/td><\/td><\/tr>
Net income (M\u20ac)<\/strong><\/td>5 126<\/td>5 183<\/td>5 217<\/td>5 653<\/td>6 422<\/td>7 464<\/td>10 684<\/em>*<\/td><\/tr>
Annual growth<\/em><\/em><\/td><\/td>1,1 %<\/td>0,7 %<\/td>8,4 %<\/td>13,6 %<\/td>16,2 %<\/td><\/td><\/tr>
Gross margin<\/strong><\/td><\/td>84,2 %<\/td>83,5 %<\/td>83,5 %<\/td>83,2 %<\/td>83,9 %<\/td><\/td><\/tr>
Net margin<\/strong><\/td><\/td>34,5 %<\/td>31,9 %<\/td>33,2 %<\/td>33,9 %<\/td>31,4 %<\/td><\/td><\/tr>
ROIC<\/strong><\/td><\/td>116,7 %<\/td>98,0 %<\/td>82,8 %<\/td>69,0 %<\/td>73,6 %<\/td><\/td><\/tr><\/tbody><\/table>
The table presents the realised key figures of Novo Nordisk. *The figures for 2023 are consensus estimates. Source: Bloomberg<\/figcaption><\/figure>\n\n\n\n
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