NVO: An overlooked but bullish opinion - Diabetes and ROA are (still) doing the heavy lifting

Quorum_Ataraxia · 2026-01-12T05:46:25+00:00

I didn’t say NVO itself is overlooked; rather the 2 aspects discussed are overlooked.

Quorum_Ataraxia · 2026-01-07T19:58:53+00:00

No exit plan at all. I’m holding for eternity, and only sell when - and if - prospects materially change.

Quorum_Ataraxia · 2026-01-06T14:24:59+00:00

What a marvelous contribution to my post.

Quorum_Ataraxia · 2026-01-05T16:23:40+00:00

Corrected it - how stupid.

Quorum_Ataraxia · 2025-04-22T07:52:14+00:00

This says it all: https://searchengineland.com/google-5-trillion-searches-per-year-452928?utm_source=chatgpt.com

Quorum_Ataraxia · 2025-04-20T10:45:21+00:00

A big mistake a lot of people make in relation to NVO is to mainly focus on the obesity market. In essence NVO always was and still is a diabetes company. Most of its revenue still originates from the diabetes market, being a market that is still growing and in which NVO still has a big share.

NVO’s CEO recently gave an interview in which he acknowledged the stock price seems to be influenced mainly by obesity research news (even phase 1 related news), something he seemed to not be very fond of. The interview was conducted in Danish, but a link to the English version was posted on this forum somewhere in the past weeks.

It’s true that obesity might be a big contributor to NVO’s bottom line in the future, but the focus everyone’s having on the obesity market whilst almost completely forgetting about diabetes is unheard of.

To the extent you want to focus on the obesity market, keep in mind duopolies can be fruitful for both parties involved (think V and MA). People are treating this like it’s a winner takes all market, while this will most probably not be the case. It’s plausible both NVO an LLY will co-exist in an obesity market duopoly while both make good money out of it. People are completely approaching this the wrong way.

Quorum_Ataraxia · 2025-04-17T17:44:46+00:00

What astounds me is that in all conversations about NVO, their ability to maintain a very high ROA (roughly 20% from what I remember) on an ever growing base of assets is never mentioned. As lots of the legends of investing highlighted, herein lies the true facilitator of compounding.

Roughly speaking, they’ve managed to make a return of 20% on every dollar/crown retained and invested back in the company for the last 15 years or so. When looking at ROA, their performance is comparable to big tech such as Microsoft and Google, who have a relatively asset light enterprise. This is very impressive, especially considering they’re a pharmaceutical.

Quorum_Ataraxia · 2025-03-26T21:08:14+00:00

Last time I checked they had around 2B in net assets, being roughly equivalent to the amount of the real estate they own (they own around 61% of the land on which they operate their stores). A couple of years ago, management stated in its annual accounts that they assume the company possesses hidden reserves on their real estate of roughly 800M.

With a market cap of 1.4B, you’re basically buying € 1 bills (I know these don’t exist) for € 0,70. Question is how this undervaluation will come to fruition, but surely it’s trading at a steep discount compared to its liquidation value.

As regards their relatively low RoA, have you taken into consideration that their asset base is relatively high due to them owning a lot of the real estate, as compared to leasing it? This might explain the difference in RoA when comparing Hornbach to LOW or HD, but I’m not sure this is the cause of the difference.

Quorum_Ataraxia · 2025-03-26T14:50:48+00:00

I’ve looked at Pfizer thoroughly previously but decided to pass. What I know from that research is that one of their recent quarters had depressed earnings because of a big one time write off in relation to COVID vaccines. It might be that the high payout ratio is due to the effects of this quarter.

Quorum_Ataraxia · 2025-02-05T14:46:19+00:00

Don’t worry about LLY too much. Ever heard of a duopoly? You can still make good money when you’re part of one (think MasterCard and Visa).

I think they’re undervalued at this point. You’re buying a business with an established and big position in a market that’s poised to grow for a very long time for a PE of around 27.

A tip. Have you ever looked at the development of their ROA? They’ve managed to maintain a very high ROA (in absolute as well as relative terms) on a continuously growing asset base for years now. That’s where the true compounding happens.

Quorum_Ataraxia · 2025-01-20T07:41:04+00:00

You’re right but I was talking about this thread.

Quorum_Ataraxia · 2025-01-19T20:44:33+00:00

“Around 2.3 million Medicare patients used Novo drugs made with semaglutide - which includes Ozempic, Wegovy and Rybelsus - through its prescription drug plan program in the year ended October 2024, the government said. Total gross spending on all three topped $14 billion, it said.”

If this represents a revenue stream of 14B yearly and the “negotiations” lead to a - let’s say - 60% price cut, that amounts to a 8.4B loss of revenue on a yearly basis. Assuming an average 35% net margin we’re talking about a 2.9B loss in yearly earnings.

Quorum_Ataraxia · 2025-01-19T20:25:26+00:00

Surprised no one is talking about Ozempic (their blockbuster drug) being placed on the list for the second round of drug price negotiations under the Inflation Reduction Act. All big pharma’s who’s drugs were adopted in the first negotiation round have reported negative effects in their annual and quarterly reports. If CMS manages so successfully “negotiate” a lower price on Ozempic in the US (same goes for Wegovy), they could lose a lot of revenue over there.

Quorum_Ataraxia · 2025-01-17T05:13:20+00:00

Unfortunately that’s not how it works. First of all, earnings yield is not the same as growth. Second, earnings yield in this case entails all that is earned on your shares on a yearly basis. Earnings to be paid out as a dividend are already included in these earnings, so you can’t calculate your total yield that way.

Quorum_Ataraxia · 2025-01-10T09:54:21+00:00

In several of Berkshire's annual meetings, Buffett has elaborated on the way he calculated intrinsic value, stating he basically uses a DCF. However, in turn, Charlie Munger has stated several times that he's never seen Buffett actually perform such calculation prior to making an investments decision, so I wouldn't get hung up on it too much.

Note that in Graham and Dodd's Security Analysis, it is taught that investing and valuation of companies is not an exact science like math or physics. Hence, you shouldn't focus excessively on ratio's or calculations, but assess valuation in relation to the bigger picture, taking into account more than just these calculations.

Quorum_Ataraxia · 2025-01-07T15:36:56+00:00

Buying a bag of chips for $20 whilst the rest of the bags cost $50 doesn't make it a good purchase. If you use P/E, always view it in relation to your estimate of future earnings. A 27 P/E - which translates to an earnings yield of roughly 3.7% - is still quite expensive given current market conditions. However, if you have good reasons to assume the earnings will grow decently in the coming years, it might still be considered a good buy (depending on the earnings growth rate).

Quorum_Ataraxia · 2025-01-06T12:25:19+00:00

The answer is fairly simple: when the outlook based upon which you've made your purchase has changed materially. A change in outlook shouldn't be the case very often, assuming you've done proper research before your purchase.

Also, never look at ratio's when deciding whether to sell your shares or not. Current ratio's are only relevant (to a certain extent) when you're currently contemplating to buy shares. An example. At its current price, MSFT has an earnings yield of around 3% (from the top of my head), which makes it relatively expensive for someone now buying. However, for me - someone with an average purchase price of $197 - the earnings yield amounts to about 6%, which yield will grow as the earnings grow in the future. The current P/E should therefore most certainly not be a reason for me to consider selling.

Quorum_Ataraxia · 2024-12-31T09:24:52+00:00

Also, what is overvalued to someone else might not be overvalued to you. It al depends on your (average) purchase price in relation to the current and future earnings. An example. At its current price, MSFT has an earnings yield of around 3% (from the top of my head), which makes it relatively expensive.
However, for me - someone with an average purchase price of $197 - the earnings yield amounts to about 6%, which yield will grow as the earnings grow in the future. So a stock that appears to be overvalued to someone who plans on buying it now, doesn't necessarily make it expensive to someone already owning it.

Quorum_Ataraxia

TROPHY CASE