Novo Nordisk’s 47% price surge presents us with a nice problem to have

by Alec Hogg

A sad part of South Africa's isolationist past is our blinkered approach to global investment opportunities. At Biznews, we're doing our bit to expand the collective horizon by researching and writing about offshore shares. To this end we run a model portfolio whose performance is visited monthly as part of a sponsorship by Standard Bank's superb webtrader service.

In preparing for Wednesday's update, I've been doing some work on one of our share picks, Danish headquartered pharmaceuticals group, Novo Nordisk. The global insulin leader, in its quarterly results last week Novo Nordisk reported a sparkling 19.3% rise in net revenue.  But that's landed us with a problem. The share price has gained 24% from the $46 we paid in December to $58 now. Add the Rand's depreciation and the gain for South African investors has been a hefty 47% in nine months.

So can those who missed out in December buy now? It's a great company. But our intrinsic value for Novo is $56 a share, which means there's no margin of safety and we couldn't recommend buying this stock today. Fortunately, unlike when you're restricted to the JSE, internationally, there are thousands of other top quality shares to pick from. So not being able to buy Novo because it's price has run hard isn't actually a problem after all. Welcome to the real world.

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