WEBINAR: Novo Nordisk hits 52wk high

In this month's instalment of the Biznews.com Global Share Portfolio Webinar, Alec Hogg once again takes us through the performance and current position of the long-term portfolio, which is proving to be highly successful indeed. If you've just joined in on this journey, not to worry. Hogg provides a comprehensive breakdown of how the shares are doing and how the companies, split between the likes of Google, Amazon, Berkshire Hathaway, IBM and Novo Nordisk, are performing. Novo Nordisk has once again been the star performer of the portfolio, with Berkshire Hathaway proving to be rather disappointing. Find out the bigger picture in this user-friendly perspective for investors, traders, market-watchers and laymen alike. – Tracey Ruff.Well, it's exactly 12:30 and we're on Thursday, the 23rd of April. I'm Alec Hogg and here is our monthly update of the Biznews.com Global Share Portfolio. Just by way of introduction for those who haven't been following us over the last little while, what we did was we started with $200,000.00 that was invested in the Biznews Share Portfolio, onto the Webtrader platform. We have the Standard Bank Webtrader, which is a fantastic facility that can enable us to invest in many stock markets around the world and this is really a way to start helping people to invest. A bit of a handholding, to put together a model portfolio so that we can then see how that portfolio performs after all costs, etcetera. It really is a fantastic system and clearly, we've been very fortunate. This is a long-term portfolio. It's meant to be held forever – never for any of the shares to be sold. Of course, sometimes shares do go a little bit out of kilter and you can then take a decision but even though share prices are very high at the moment, that isn't something we're doing. Anyway, the model portfolio then has made certain investments. .___STEADY_PAYWALL___.Let's just have a look at the structure on the next graph. That shows you the account overview. The account value is now at $208,000.00. Of that, $176,000.00 has been invested in equity positions and we still have $32,000.00 being held in cash. On the cash component, it depends very much on what we are able to find as a stock selection. This is probably the best way to look at it..There's the account overview. Those are the shares that are held in the portfolio. Amazon.com, Berkshire Hathaway, Google, IBM, Novo Nordisk, and Vanguard. The intention is to invest roughly one-third in Vanguard, roughly one-third in these two stocks (15 percent each for Berkshire Hathaway and Google) and then to have five stock picks. Amazon.com, IBM, and Novo Nordisk are the first three of those stock picks. They would each absorb an investment of eight percent of the portfolio. .We'll get into more details in a moment, but that's the way the portfolio has been structured. You might have heard about Core and Satellite portfolios. Well, the Core here is the S&P 500 (in other words, the Index/Exchange Traded Fund), which is very cheap – the way in and out. We've looked at costs in a big way and as you'll see a little later, the Vanguard Fund closely tracks what happens on the S&P 500 – that overall index in America. Then we've taken another third into our two core holdings – our two foundation stocks – and those are Google and Berkshire Hathaway, and then we'll have five share selections. You can do this yourself. You can actually make these investments anytime you want to, through the Webtrader platform. That's what this is all about. Okay, so much for the background. Let's have a look at how our portfolio has performed in the past month – in fact; in the four-and-a-half months to date, (we started on the 5th of December, as you can see over there). .It is now the 3rd of April, so give or take a few days we've been going for about four-and-a-half months. This is in U.S. Dollar terms. The Vanguard Portfolio: we have 318 of those units and they cost us $188.00 each. They're now at $193.00, so not a huge increase there. In terms of this table, what we wanted to reflect here was the portfolio, the percentage of the portfolio, and how it is performed at the moment. If you have a close look at this table, you'll see the target for the S&P 500 (in other words, the Exchange Traded Fund) is 30 percent. By the way, it's very important to have a look at the codes after these stocks (VOO: ARCX for the Vanguard S&P 500) because there are various types. Google has a few different shares. Berkshire Hathaway, of course, has As and Bs, etc. so you want to get those codes absolutely right so that when you are buying or following our portfolio, you buy the correct shares. .That is particularly important when it comes to the Exchange Traded Fund. Thirty percent is therefore held in Vanguard. There's the target – 15 percent each. Berkshire and Google are both at 14 in the current portfolio. That's primarily because we've had fantastic performance from Novo Nordisk and Amazon.com, two of our share picks. IBM has been pretty stable there at eight percent. As you can see, of the cash components, we still have $32,000.00 sitting there in cash. .Let's move on to the next one. .This will give you the Rand figures. This is the critical issue for South African investors. At the 5th of December when the portfolio began, we had R11.27 for each U.S. Dollar. As you can see, the Rand today is at R12.28 for each U.S. Dollar. It's very easy to have a look. The cash has remained unchanged at $32,356.00 and that is a nine percent appreciation in Rands. Even if we didn't do a thing in the portfolio, even if we just put all the money into cash, we would have been nine percent up and in many ways, offshore investing is trying to do that. It is based on an opinion/a view that we have, that the Rand is a weak currency and likely to remain weaker into the future. As you can see, in ± five months, the Rand has depreciated by nine percent against the U.S. Dollar. That's running at 20 percent per year. .Very scary, if you happen to be an importer or somebody who uses imported products in South Africa, but very attractive if you're an exporter from this country. It will paper over many problems that you might have in your business because the Rand continues to depreciate. We can get into a political issue or an economic management issue on that one. If you read Biznews, you'll know that we think the economy is not being well managed. We think that the development status is going to ensure that the Rand remains a weak currency until the political/economic management changes, to take account of the world/global realities. However, that's politics and we're not really interested in politics. We're just interested in an overall view and as you can see here, our view is that the Rand will remain weak and that's primarily the reason why we should be looking to invest in offshore equities. Justin is sitting here with me..Hi, Alec..You're watching the questions..I am watching the questions. None have come through just yet..Fantastic. There's your invitation, so please ask away on your questions. As you can see, the portfolio in Rands is up 13 percent in four-and-a-half months. That translates to about 30 percent annualised. Wow, I wish I could be making those kinds of returns on all the investments that I made. It's been a fabulous start. Remember, this is not a portfolio that we're suggesting that you buy to trade. This is a portfolio that you buy to hold. Thirty percent to me, at the current inflation rate…if you're doing that over even three years, you're ahead of the game. In four-and-a-half months, we're at a position now where we would have been quite comfortable in the next three years. Of course, we're going to try to do better than that, but the reason for this is quite obvious. The Vanguard, which is on the American Stock Market (S&P 500) – that's 11 percent. .It's a little bit better than what the Rand has given us – a little bit ahead in cash. The idea here is to try to avoid losers in the long term and to actually try to get lucky with a few winners. Currently, Berkshire Hathaway has been disappointing. It's a four percent gain. In fact, as you saw in the previous chart, in Dollar terms it's cheaper today than when we bought in, so that's a big tip for you. Google came back very sharply in this past month. We'll talk about that in a moment. Novo Nordisk had a fabulous month – up 33 percent in the four-and-a-half months we've held it. IBM is a little bit ahead of the game. The results were out earlier this week. We'll talk about those ones, too. Amazon.com: there's another one of our stars – up by 30 percent, since we purchased. This has been a real bouncer. It was down significantly after our purchase price and then it shot up because of the opportunity there. Anyway, as you can see, the bottom line – 13% improvement in cash..Let's move on. . Remember, you can ask those questions. Justin will pick them up. Here's a better look at the individual stock performances. Rand/Dollar has depreciated by nine percent (appreciated for us because we took our Rands over and converted them into $200,000.00 on the 5th of December). There are the gains (with no losses, thankfully) in the various allocations that we've made. Nice work, Novo Nordisk and Amazon..Okay, let's get into the guts of the portfolio, starting off with Vanguard. . Vanguard is a very low-cost Exchange Traded Fund. I love the idea of putting money into Exchange Traded Funds as a core of your portfolio. We have one-third in Vanguard. Of course, it's going to track the market so what it's saying to us is that the share selections we make around it have to be better than what the market does overall. Otherwise, what's the point of saying to you 'have a portfolio'? For the 'know-nothing' investor: you can put 100 percent of your money into this Vanguard Fund. In other words, if you are scared of having individual shares, that is fine to just buy the market. What we're trying to do is to outperform the market. Not many people do that. Arithmetic will tell you that on average, 50 percent of the Asset Managers will beat the market and 50 percent won't but then there are costs involved. .That means that the actual percentage of Asset Managers who do outperform the market over an extended period of time is only 30 percent, or only one-third because when you add the costs in, they have to do so much better just to beat the market overall. That's what we're trying to do in this portfolio and to have a bit of fun with it as well – almost earning while you're learning. . There you can see, the performance of the S&P 500 Index in the past month was pretty flat and Vanguard followed it as well. Vanguard was a little bit better than the S&P 500. I'm not sure why that would be. Maybe accumulation of dividends and it's up by about one-third of a percent, so flat in the last month and nothing to write home about there. .This man, our role model Warren Buffett says 'you should trumpet your disappointments and be modest about your successes'. Well, we're following in his view here because of all the selections we've made in the portfolio, the disappointment has been Berkshire Hathaway and it came through pretty much in this month. This has been the time that Berkshire really has not performed. . As you can see there, the S&P 500 was flat, Berkshire was down by two-and-a-half percent, but I really have no concerns and the reason for this is that the Berkshire Hathaway AGM is going to be held within the next couple of weeks. It's in Omaha – the first weekend in May. This year is the 50th anniversary of Warren Buffett running the company. When the pilgrims go to Omaha, they usually get all fired up and then come home and buy some more of the Berkshire shares. .I expect that when we talk in a month's time, you will see that the share price has risen, so there's an obvious tip here. If you are looking to follow us in this Global Share Portfolio, it's a good idea to be buying into Berkshire Hathaway today because you're buying them cheaper than the price that we paid – slightly more in Rand terms, but in U.S. Dollar terms, you can actually buy these B-shares cheaper than we paid. B-shares and A-shares: why is there a difference? Well, the A-shares are the original shares that were listed in Berkshire Hathaway. Some years ago, Warren Buffett was convinced to make it more affordable for ordinary citizens. The A-shares are trading at hundreds of thousands of Rands, just for a single share, whereas this one is (as you can see there) $142.00 per share. It's still quite a lot for a single stock, but at least you can go in and buy them. Justin, no questions yet?.No questions yet – none..There are lots of people on line here, so maybe I'm giving you all the solutions you need but if you would like to ask a question, just go and click on that button and we'll be able to pick it up and push it through. That's Berkshire Hathaway, our disappointment..Google's come back sharply in this period. .As you can see, the share price was sitting at about five percent above where it ended the quarter, so we had Google coming back by five percent. This has affected the portfolio's performance, as well. It's a big day today because we have two of our constituents in the portfolio – Google and Amazon – both issuing their quarterly results. As far as Google's concerned, it's also launched into the United States today a wireless mobile service, which is showing its intentions to get deeper and deeper into the mobile technology area. This is potentially a game changer because up until now, when you buy data on your mobile phone you buy a bundle/package. If you don't use it all at the end of the month, you lose it. Google's new approach is that you only pay for what you use, so it's almost like per second billing on cellphone voice calls. .That's what Google is doing to the data calls. Now, one hopes that they bring this into the South African market in the near future because clearly, we can also do with some help on reducing the costs on telecoms. They're doing that today in the United States. They're also coming out with their earnings today – their quarterly figures. There's undoubtedly going to be some push back from the stronger US Dollar. We saw that in IBM's results that came out earlier in the week. In fact, they were out on Monday. That is starting to affect the American-based companies, but the analysts are expecting that Google will come out at about a 16 percent growth in its revenue. The Americans love to watch revenues. It will tell us a little more, no doubt, about Google Glass being a problem…that Google Glass was a failure, and then we'll get to hear what they think about the EU Competition Commission investigations as well. A couple of questions are starting to come through now. There are actually quite a few questions so I'm not quite sure if we're picking up. I'm sorry. I see it only has to do with the volume bars and people trying to get technology issues..Right, so that would be going through to the guys at the go-to webinar side of things. I'm not seeing any questions on this side..Okay, cool. We are wide open for questions, so if there's anything that does tickle your fancy here, please just put in. Remember, we only have half an hour on this seminar so usually, what tends to happen, is all the questions come at the end. Let's try and get them a little earlier, if possible. There's Google and we have Google's quarterly report coming out today. I think we're certainly going to find that the share price will react to that. Last time around, Google did beat expectations. Let's hope that they do it again but remember, this is a longer-term investment..Here's the stock that moved very sharply because of its last quarterly earnings report and it's coming out with earnings today as well. . Let's spend a little bit more time on Amazon.com. It's anticipated that they are going to be disclosing – for the very first time – what Amazon Web Services are doing. Up until now, that's just been bundled in amongst a title called 'other' and American analysts are very excited about being able to see what Amazon is doing, in fact, in this huge growth area into the future. Cloud computing is big – very, very, big indeed – as an opportunity for Amazon and they are big in this area. They started in Cloud computing about seven years ago and the rest of the market has only just started picking up, so they can't believe that they were given the opportunity that they had. They're generating about $6bn per year in revenues from Cloud computing. .It's small, compared with $83bn that they get from their ecommerce operations, but it is very big relative to the competition. In fact, the closest competitor is one-tenth of Amazon's size, and that's Microsoft, so Amazon's had a head start here on the Cloud business and it's something, which is expanding all over the world. We'll hear a little later from IBM that they're also taking a big bet on Cloud. Jeff Bezos, the creator of Amazon, says that Cloud could eventually be bigger than the ecommerce business. The way it's growing, it's going to take a few years to do that, but it is really increasing rapidly. As a result of that, they're going to start breaking it out in their results today. There are one million active users of the Amazon Web Services; an area that is expected to generate lots of revenues into the future. As you can see, the market has anticipated some good numbers from Amazon today. .The share price has moved very strongly in the last couple of days – up by four percent in the month – and substantially outperforming the NASDAQ, which itself was half a percent better. Amazon's expected to produce revenues today of about $22bn and to show loss of 12cents/share, but in the last quarterly results, they were expected to generate 17 cents in earnings and in fact, posted 45 cents. That was after a disappointing third quarter number. Amazon can really turn the dial any way it wants to. If it looks at the market expectation of 12 cents loss…if the number comes below 12 cents, you're going to have to start worrying a bit. It will probably knock that share price back but given what they did last quarter, although the shares are at a 52-week high, I would be confident to see that they could get even stronger. .Amazon.com is also particularly in the Cloud service area, hiring people at a rate of knots, just like Facebook. We have Facebook's numbers out this morning. They have added 48 percent to their staff complement in the last year. Imagine that, 48 percent more staff at Facebook today than there were a year ago. At a recent seminar, one of Amazon's top guys was saying that the engineers are now spending around one-third of their time finding new talent and putting new people onto the books, rather than focusing on the business itself. It just shows. If you're in the right sector and in the right sweet spot in the world today, the sky's the limit..Moving onto our next portfolio holding – IBM (International Business Machines) – it comes from Armonk, New York. Their results were out on Monday and it's nice to have a look back at why the market likes them so much. They pushed the shares up by three-and-a-half percent on the news. IBM is a company that's been around a long time. It's an old business in many respects and what it's trying to do under the custodianship of the CEO Ginni Rometty (who's been there now for three years), is to move out of those old businesses into new business. She's taken some huge bets. They've sold off some of the massively commoditised businesses. In addition, they're trying to reduce their reliance on things like hardware, services, and even software and they're going big into the Cloud computing services, where their revenues are growing by 75 percent per year. .The problem is that IBM is so big. It is such a huge organisation, turning over $80bn per year, of which it makes about half of that. Their gross profit margins are nearly 50 percent, so it is one of those companies that really is in a position where it's currently locked into its business. Can it grow quickly in the new areas that it's investing in, or quicker than it's getting out of the businesses that are, in the longer term, not going to be growth business anymore? That's the story with IBM. Everything has a price and this is why we love this company. Indeed, this is why Warren Buffett loves this company. Of his core holdings, the only one that he increased in the past year was IBM and he made a big bet on this company. We think that the opportunity on the Cloud side is huge and we are seeing Amazon itself splitting that. We've seen Google getting into that market. .Microsoft of course is there as well. Cloud computing is a business where, instead of having all your computers on site; with the Internet being more and more efficient, you now put a lot of your software, hardware, and data into the Cloud (as they call it), so it's offsite. Who benefits most from that? Well, those people who have a global reach, great analytics, good security, and scale and IBM has all of those things. Add to that, the fact that IBM also produces mainframe computers. Incidentally, mainframe sales doubled in the past quarter, compared with the same quarter last year. That's a direct impact of how the world is moving to Cloud computing. IBM's well-positioned in that regard. The hardware sales – overall – were down 23 percent but the mainframe sales (these are the very powerful computers that will drive things like the Cloud and the mobile technology and it has to be housed somewhere) have been growing very rapidly. .You therefore have two big areas of improvement for IBM. In addition, there's Watson, its next-generation artificial intelligence bet. It's named after the two names in IBM's history that stand out biggest, both Watsons – Watson Junior and Watson Senior. The one who succeeded his father…they have named this artificial intelligence computer after Watson and it's all to do with big data. They have some recent announcement on a partnership with Apple and Johnson & Johnson in the medical field, so there are many ways that IBM can kick in into the future in its growth areas. The balance here though is can they move across without losing too much on the old business, before the new businesses kick in. It reminds me a lot of Naspers. It really does. Naspers was a similar business that had its old printing and newspaper companies. .Then it made some investments in the Internet and of course, it hit it big with Tencent and Naspers, of course, has exploded the share price out of all proportion. It could happen with IBM. It certainly isn't beyond the realms of possibility. As far as IBM's share price is concerned, in the last month it did pretty well, nothing. It bounced around a little bit, but it's up half-a-percent relative to the S&P 500 Index of about one-fifth of one percent, so not too much change there. As you can see, a big move after the results were released. At that point in time, it jumped three percent in a day and it's held onto those higher levels. IBM: one for the future. .If you've just joined our portfolio or you want to follow us now, that's an obvious one for you to invest in, as well. It hasn't moved much since we bought it..Here is the star of the show, once again. Novo Nordisk. A 14 percent jump in the past month. As you can see, it was early in the month. Novo Nordisk is the world's biggest producer of insulin products – insulin directly related to lifestyle diseases – and it has a very strong business that keeps churning out the cash. It invested in insulin many years ago. It's now able to keep the price increases at a manageable level, which keeps competitors out. It owns 50 percent of this market. Insulin is something for those people who are diabetic, where you have to get the right balance of insulin you're using. It's quite a process. It means that once you have a particular type of insulin (and there's a 50 percent chance of having one of their products), you tend to stick there, indefinitely. In the past month, what caused the share price to jump was Tresiba got the green light. .This is a key insulin product, which they've been trying to get into the United States. Two years ago, the United States Food and Drug Administration (FDA) blocked it. They wanted more information. They were concerned that one of Tresiba's side effects was that it would create strokes. Well, Novo Nordisk did a separate study (just checking on that side effect) and the FDA is happy enough with the results two years later to say 'sure, you can launch it in the United States'. Tresiba is available pretty much everywhere else in the world, but to get into the United States is a massive move for this country. As you can imagine, with insulin and the obesity issues that are going on in the U.S., this is a very important market, particularly in that line of work. The other big bit of news was that their anti-obesity drug Saxenda was approved in Europe, so you have these two very good bits of news that came out under a month ago for Novo Nordisk. .Hence, the share price jumped ten percent in a couple of trading sessions. Saxenda has now been launched in the United States. The company (Novo Nordisk), which is Danish, is saying 'don't get too excited about it because it's going to take a while for this anti-obesity drug to actually kick in'. They have taken 500 of their 3000 sales force in the U.S. to market the drug though, and Saxenda is one of the few anti-obesity drugs that now has – pretty much – worldwide approval. It was approved in the United States in December last year, approved in Canada in February, and now in Europe just towards the end of last month. The other bit of good news to come out of Novo Nordisk is that the company has announced a R26bn share buyback program, so it's going to be in the market, buying its shares. Usually, that tells you that the underlying base of the current share price is pretty stable. .Nice story isn't it for Novo Nordisk. . If you didn't come in with us, as you can see there on the portfolio, Novo is up by 33 percent since we bought it in December. It actually took a little while to get going but now that it's gathered momentum, it's at a 52-week high with lots of good news coming through there. We're expecting that there'll be quite a big cash dividend in the near future from Novo Nordisk..You also have a very good run there by Amazon.com. We'll know more about that later today, as we'll get some further insights later today from Google – both of those issuing quarterly reports. Berkshire Hathaway: I'm very comfortable that when the pilgrims come back within the next month from their visit to the annual visit to Omaha (more than 30,000 people getting together there), they'll just have a bit of a feel-good factor and probably bump that share up as well. IBM is a good, long-term bet, progressively making strides. It's been a huge turnaround over the last three years, but there are signs that they've made the right kinds of bets and although it will take a little while to go forward, it is a stock that can be bought very confidently at this point in time..Well, it seems as though we have answered all your questions because there weren't any. I know there are a number of people. I can see quite a number of people attending this function. Perhaps we are just giving the kind of insights that you need and you can think about them a little bit more. You're welcome to email alec@biznews.com or indeed, talk to the guys at Webtrader. They'll be able to give you further insights. Well, it's been a pleasure as always to be in your company. I had an easy job today, Justin..Indeed. Just a reminder: this will be published on biznews.com, so come check back this afternoon or tomorrow morning..Yes. Stuart from Standard Bank is recording it all. Justin, when I started in journalism, after a while I worked for the SABC and you literally had to record on big tape machines. You'd do the editing on these…I don't even know if they have them in mainframes anymore. Those tape recording machines…we had to actually cut them with a guillotine and then put sticky tape on them. You'd hear ripping sounds in between people speaking. However, no more taping. It's called recording. Thanks very much. We have a couple of people saying 'thanks for the webinar today'. It is our pleasure. If you'd like to go over it again, you will be able to pick it up, as Justin says, in the next couple of days..Yes..Thank you and thanks to our partners at Standard Bank Webtrader. We'll be back again in a month's time. I look forward to being in your company then and let's hope we can have more happy hunting..Cheerio.

WEBINAR: Novo Nordisk hits 52wk high

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