Here’s Why LRT Capital Finds Novo Nordisk (NVO) as Highly Attractive”

LRT Capital Management, an investment management firm, published its third-quarter 2021 investor letter – a copy of which can be downloaded here. A return of +18.39% was recorded by the LRT Economic Moat strategy year-to-date, extending its 12-month returns to +35.34%. You can take a look at the fund’s top 5 holdings to have an idea about their best picks for 2021.

LRT Capital Management, in its Q3 2021 investor letter, mentioned Novo Nordisk A/S (NYSE: NVO) and discussed its stance on the firm.  Novo Nordisk A/S is a Bagsværd, Denmark-based multinational pharmaceutical company with a $108.17 market capitalization. NVO  delivered a 54.86% return since the beginning of the year, while its 12-month returns are up by 63.55%. The stock closed at $108.17 per share on November 26, 2021.

Here is what LRT Capital Management has to say about Novo Nordisk A/S  in its Q3 2021 investor letter:

“Novo Nordisk is the global leader in insulin, which is, sadly, a growing business as more and more people around the world suffer from diabetes. millions of people need daily injections of insulin to stay alive54, a number that, unfortunately, is likely to continue to grow by millions more in the coming decade. It may seem at first glance that insulin should be a commoditized business, after all, it was discovered and synthesized over a hundred years ago, but nothing could be further from the truth. There are many types of insulin and Novo Nordisk has spent billions on R&D over the years to develop new products. On February 11th, the company reported favorable results from a phase-3 trial of Semaglutide, a drug that is currently used for Type 2 diabetes treatment. The study evaluated the use of Semaglutide for weight loss treatment in non-diabetic patients and found a significant impact on weight loss for patients receiving Semaglutide vs. the placebo control group. If Semaglutide is approved for weight loss treatment, we expect it will be meaningfully accretive to the company’s bottom line.

The company’s proprietary product line supports returns on invested capital of over 40%, and while sales growth is relatively slow (+6% annualized CAGR over the past decade), the company’s shares trade at a reasonable valuation of only 22x forward earnings. For a company with an extremely predictable business, high returns on capital, and an easily forecastable future, we believe this to be highly attractive.”

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Based on our calculations, Novo Nordisk A/S (NYSE:) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. NVO was in 27 hedge fund portfolios at the end of the third quarter of 2021, compared to 20 funds in the previous quarter. Novo Nordisk A/S (NYSE: NVO) delivered a 4.44% return in the past 3 months.

Disclosure: None. This article is originally published at Insider Monkey.