Figure 1 Novo Nordisk A/S and the struggle against diabetes

Source: Company Results Presntation

Spotting big picture themes is usually a good route to investment success.  Unfortunately one growth theme in the healthcare world today is the rise and rise of those impacted by diabetes.  The world’s most successful diabetes treatment company – as shown in the graphic above – today is Novo Nordisk which is quoted both in its domestic Danish market as well as in US ADR form.  Contained within their recent presentation document was the shocking observation that ‘the number of people with diabetes is expected to increase by 48% in 2045’ to 629 million, driven by bad diet and heightened obesity levels. Just as shocking is that only 50% of current diabetes sufferers have been diagnosed and only 50% of them have access to care.  With the best range of treatments across all diabetes types there are plenty of new potential clients for Novo Nordisk to help. Of course, such a backdrop attracts a level of corporate competition but the Company’s pipeline of enhanced treatments will keep them as the top global market player for some time.  Certainly they continue to take market share off well-known UK names such as GlaxoSmithKline (GSK) and AstraZeneca (AZN) among others. This is aided by the majority ownership of the company by the longer-term oriented Novo Foundation who have proved masterly, over time, in developing healthcare and medical companies.  I also note a near debt free balance sheet and good cash flow generation, which is increasingly returned in dividend payments to investors.

www.dynamicopportunitiesfund.com recently invested in Novo Nordisk.

Chris.bailey@danielstewart.co.uk Chief Investment Officer

 

Figure 2: Ferguson PLC: divided plumbed in

Source: Google Stock Images

Ferguson (FERG.L), formerly Wolseley, is the world’s leading specialist distributor of plumbing and heating products  with 2,310 branches, 33,000 associates and 44,000 suppliers. In March the Group reported interims to 31st January with revenue of $10.02bn vs. $9.38bn for 2017,Pre-tax profit of $598m vs. $556m and Net Debt of $1.4bn vs. $1.63bn. An interim dividend of 57.4 cents (up 10%) was declared together with a bumper special dividend of $4 (a yield of 5.31%) and a $500m share buy-back programme, all facilitated by tax cuts in the US. The North American businesses, which sell to housebuilders and a wide range of industrial sectors, are thriving while the UK market remains ‘challenging’ and Amazon is a potential disruptive competitor. The current share price is £56.40 (52-week range £44.27-£57.22), which makes the market cap £13.9bn. In April CEO John Martin purchased 5,523 shares at £54.18 after confirming the results for the full year will be on track. The shares go ex-div on June 11th.

steve.shelley@danielstewart.co.uk Investment Hub

Figure 3: Oil price not rigged!

Source: Bloomberg

The small print is still being digested but President Trump’s unpredictably predictable decision to pull out of the Iran nuclear deal has vindicated the financial investors who have been punting on oil futures. They have become a third force to normal Supply and Demand in influencing the price of crude. It may yet be more posturing by Mr Trump but if he reimposes and widens the sanctions against companies doing business in Iran he is going to cause damaging dislocation and drive other countries together to circumnavigate his policy. However, the financial punters believe that new partners OPEC and Russia will be only too glad to accept higher prices while turning the taps on some more, especially if Venezuelan output continues to slump. For Saudi Arabia there are, of course, also political benefits from this new rupture and Mr Putin can probably see upside of his own. The big question is whether the domestic US producers can raise their game, which is no doubt one of Mr Trump’s primary motives. There have always been doubts whether US shale could be a lasting swing factor in Supply through being able to produce enough to counter OPEC’s predatory pricing. Figure 6 suggests that for all their celebrated nimbleness US producers cannot commission rigs at a rate to keep up with the price of the black stuff. It may have taken two years but financial investors can already look forward to a period of sustained pay-back as prices look like staying at these levels for some time, if not necessarily going much higher.

Alastair.winter@danielstewart.co.uk Chief Economist

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By Alastair Winter

Chief Economist at Daniel Stewart

alastair.winter@danielstewart.co.uk