Novo-Nordisk (NVO)

They got approval for 3 drugs, all to do with diabetes. The demographics are in their favour. The company has always traded at an expensive multiple. The stock has done exceptionally well. It is the one Pharma name he owns. 35% compound annual rate of return.

(Top Pick Jan 16/15, Up 24.78%) Diabetes is a growing industry. This is the largest and there are economies of scale. He feels it is still in the early stages.

(A Top Pick Jan 16/15. Up 25.44%.) Has the largest market share when it comes to diabetes drugs. Diabetes is a fast-growing illness and it is reported that by 2030 there will be twice the number of people globally that have diabetes. A great way to play emerging markets.

(Top Pick Jan 16/15, Up 29.33%) Great returns. Tough to complain about. The largest market share in the diabetes space. Emerging market countries are contracting diabetes at the highest rate but you can’t sell the drugs at the same price and they can go in and cut their prices. He still likes it long term, but it went up in a flat market.

(A Top Pick Jan 16/15. Up 32%.) This is a name he is still Buying. This has the largest market share in the diabetes drug space. Because they are the largest, there are economies of scale. With economies of scale comes a fatter profit margin. Their profit margin is 20%, compared to their competitors at 11%. The part of the world that is growing most rapidly in terms of new diabetes cases is the emerging markets and Latin America, which can’t afford to pay the same amount for diabetes drugs as we can in North America. This company is able to go in and offer the drugs at a much lower price and really take over the market. Still early days. Dividend yield of 1.25%.

Largest developer/manufacturer of synthetic insulins globally. Has been a great way of participating in the global diabetes pandemic. Has done well this year because there is heightened expectation that the US is going to approve a long lasting insulin Tresaba. If this gets launched in the US, growth could be in the low teens again next year. This is a hold.

This company has done a phenomenal job. Very focused on diabetes which is a long-term growth area. The problem is, the stock is trading for a mid-$30 multiples, and there isn’t much of a dividend there. He would look at this as a wait for a selling opportunity.

Has a very strong franchise in diabetes. Stock has done incredibly well. Also, have the potential of an obesity drug coming out. A lot of that is in the stock already. The problem he has is that the stock trades 54% above its peer group, has done 22% better than the healthcare group, trades at 33X earnings and doesn’t pay very much of a yield. Wait for a pullback.

(A Top Pick Jan 16/15. Up 8.17%.) The largest in the diabetes space. The opportunity is that because they are large, they have significant economies of scale. That is important, because their profit margin is close to double of their competitors. Areas that are growing fastest in terms of new diabetes cases are emerging market countries, which are often the ones that cannot afford to pay the same amount as we can in North America, so with a profit margin that is double their competitors, they can go into that market, provide the drugs at a lower cost, start to own the market and still make very good money.

A Danish stock. Largest manufacturer of insulin globally. Modern insulin, being a biologic drug as opposed to chemical drugs, are very, very difficult to duplicate, so there is not really a patent expiry cliff. There is tremendous visibility on the growth of this stock, at 8%-10% this year and similarly in the coming years. Was up today on an announcement of ethnicity on one of their key drugs that was in trial. Dollar cost averaging into this one night be something you want to think about.

Largest manufacturer of insulin products with margins that double its competitors. In over 180 countries. They have the largest market share in diabetes care as well as the broadest portfolio of diabetes products. He sees significant growth in this space. Diabetes has grown at 11% per year for the last 10 years, and it is projected that by 2035 there will be 2 times the amount of people globally that have diabetes. The fastest growing region for diabetes cases is in the emerging markets. Dividend yield of 1.9%.

Diabetes is the primary driver of the story behind this company. Well-run company, and is dominant in the diabetes field. Diabetes is considered pandemic, so if you are a leader in the production of a product that caters to diabetes, then you should do very well. This is trading at about 25X forward earnings, and the growth rate is probably half that, so it has a PEG ratio of about 2. He typically tries to avoid companies trading at this high a growth rate.

Leading insulin maker globally. Diabetes is supposed to grow by 20% over the next 20 years, especially in countries like India and China. This is a big pool for everybody to do well, in spite of competition coming in. Usually every 5 years, this company will have a big run and then start to fall back as their growth rate begins to decline waiting for that time when they can bring new products to market, which will then be the leading edge. In the last year or so, they have been suffering only from the standpoint that one of the HMO providers has decided not to use their insulin drug. Because of this, their earnings growth has declined to roughly the 10% range, but that could be temporary. News on the weekend indicated that their Liraglutide 3 enzyme is the one injection per day that has proven it will help with weight loss for people who are diabetic. Stock is fully valued so wait for an entry point.

Probably one of the world’s largest oil field service companies. Involved in manufacturing of equipment. Big builder of drilling rigs for the drilling companies. Very diversified in a lot of different markets. This is actually a great long-term play on the growth of the energy industry. If you don’t own, wait for a bit of a back off before stepping in.

Lost an Express Scripts (ESRX-Q) contract for its synthetic insulin medicine because of price. Although that is a headwind, it is not material. Has a very broad base of profits and sells its products throughout North America and Europe. Also likes that manufacturing insulin is almost a craft, which means it is much more resistance to generics in the long-term. Not necessarily cheap at about 20X trailing earnings, but it’s a business that has pretty strong visibility into decent high single digit top line growth and much better operating profit growth for the next few years. Have done a great job of returning cash to shareholders through buybacks and dividend increases.