I recently started looking into Novo Nordisk – studying fundamentals and building out financial models.
It is a European diversitfied pharma company that owns a leading position in global diabetes market (along with Eli Lilly), but also has significant rare disease franchises.
Their recent new product launches have been very strong and investors have been rewarding them generously with every rising stock price.
Despite being a global diversified biopharma with >$100bn market capitalization), Novo Nordisk carries an industry leading P/E ratio – 30x consensus 2022 Earnings Per Share. For this, Novo has become a popular hedge fund short based on valuation (valuation shorts are extremely dangerous games you will play as a hedge fund investor).
Most of the times, consensus hedge fund shorts are good short ideas on fundamental basis – not based on data, but I would say ~90% of consensus short ideas tend to be good ideas that work out.
However, 1) if the stock has been going to the moon, and 2) there is good catalyst upcoming or has lack of negative catalyst that can keep the good story going, the stock may not be going to the moon, but also the mars!
As shown above, Novo stock price has been up for over 40% and it is now a $190bn company. And there is nothing to stop them from becoming a $250bn company – after all, it is another ~20% move (4 days of 5% moves).
Therefore, I see a great set-up for a long position here on technicals and catalyst perspective – now the work is on fundamentals
Digging up new ideas can only be possible through disciplined, process-driven routine – this is why making money consistently everyday (or regular basis) is SO hard.
Is Novo Nordisk a great long? What do you think?
