“We think this is very attractive”
LRT Capital Management, an investment management firm, has released its Q2 2021 letter to investors – a copy of which can be downloaded here. A return of + 29.68% was recorded by the LRT Economic Moat strategy for the second quarter of 2021, extending its 12-month returns to + 42.18%. You can check out the top 5 holdings of the fund to get an idea of their top bets for 2021.
In LRT Capital’s Q2 2021 letter to investors, the fund mentioned Novo Nordisk A / S (NYSE: NVO) and discussed its position on the company. Novo Nordisk A / S is a pharmaceutical company based in Bagsværd, Denmark, which currently has a market capitalization of $ 228.7 billion. NVO has made a return of 42.86% year-to-date, extending its 12-month returns to 53.08%. The stock closed at $ 100.65 per share on August 9, 2021.
Here’s what LRT Capital has to say about Novo Nordisk A / S in its Q2 2021 letter to investors:
“Novo Nordisk is the world leader in insulin, which is, unfortunately, a growing business as more and more people around the world suffer from diabetes. Millions of people need daily insulin injections to stay alive, 50 a number that, sadly, is likely to continue to rise by millions more over the next decade. It may seem at first glance that insulin should be a trivialized activity, 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 in R&D over the years to develop new products. On February 11, the company announced favorable results from a Phase 3 trial of Semaglutide, a drug currently used for the treatment of type 2 diabetes. The study evaluated the use of Semaglutide for the treatment of blood loss. weight in non-diabetic patients and found a significant impact on weight loss for patients receiving Semaglutide compared to the placebo control group. If Semaglutide is approved for the treatment of weight loss, we believe it will have a significant impact on the company’s bottom line.
The company’s proprietary product line supports returns on invested capital of over 40%, and although sales growth is relatively slow (+ 6% annualized CAGR over the past decade), the company’s shares are trading at a reasonable valuation of just 22 times forward earnings. For a business with extremely predictable business, high returns on capital, and an easily predictable future, we think this is very appealing.
Shares are + 34.43% year-to-date and + 40.92% over the past twelve months. “
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Based on our calculations, Novo Nordisk A / S (NYSE: NVO) was unable to secure a spot on our list of the 30 most popular stocks among hedge funds. NVO was in 23 hedge fund portfolios at the end of the first quarter of 2021. Novo Nordisk A / S (NYSE: NVO) has generated a return of 30.74% in the last 3 months.
The reputation of hedge funds as savvy investors has been tarnished over the past decade, as their hedged returns could not keep up with the unhedged returns of stock indices. Our research has shown that small cap hedge fund stock selection managed to beat the market by double digits every year between 1999 and 2016, but the margin for outperformance has shrunk in recent years. Nonetheless, we were still able to identify in advance a select group of hedge funds that have outperformed S&P 500 ETFs by 115 percentage points since March 2017 (see details here). We were also able to identify in advance a select group of hedge funds that underperformed the market by 10 percentage points per year between 2006 and 2017. Interestingly, the margin of underperformance of these stocks has increased in recent years. Investors who are long in the market and short on these stocks would have reported more than 27% per year between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
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Disclosure: none. This article originally appeared on Insider Monkey.