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Monday July 19, 2010
Novartis (NVS): A 'compelling' investment
by Stephen Leeb, The Complete Investor  Health care stocks haven’t set any records lately. But with many of the uncertainties over health care reform now behind us, the stocks remain strong choices—particularly for income investors.Our latest recommendation is Switzerland-based Novartis (NVS), the world’s leading pharmaceutical company. Going forward, the sector should benefit from several long-term trends, including aging baby boomers and the developing world’s growing access to health care. 
Novartis has a well-diversified collection of drugs and an attractive product pipeline. The company has four divisions: pharmaceuticals, vaccines and diagnostics, Sandoz (generic pharmaceuticals), and consumer health. Revenues last year topped $44 billion, a 7 percent increase over 2008 sales, as the company benefited from the positive trends noted above. Earnings per share and net income rose 8 percent compared to year-earlier figures. These strong financial results allowed Novartis to recently approve a 5 percent rise in its dividend, its 13th consecutive dividend increase since the company was created in December 1996. Although located in the heart of Europe, Novartis is largely immune to any problems associated with the declining euro, since Switzerland has maintained its own currency, the Swiss franc. Moreover, with nearly two-thirds of its revenues generated in emerging markets, Novartis has less exposure to Europe than you might think, and any risks stemming from European weakness pale in comparison to the stock’s strong potential. Meanwhile the shares trade at a discount to the average for the sector while yielding about 4 percent. Its ownership of Sandoz, a global leader in generic medicines, should help Novartis weather the transition as some of its patents expire. Given its diversified business, attractive pipeline, and record of innovation, Novartis remains a compelling investment. Learn more about this financial newsletter at Stephen Leeb's The Complete Investor. |
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