The INVRS Blog

This is the final (for now) installment of the $NVO trilogy.

The trifecta of good quality of earnings, consistent earnings growth and low valuation no longer exist, except for the earnings growth.

The company's quality of earnings had been dropping and its price went up.

However, I'm still long the stock and it's been doing well.

But I think there is systemic prejudice against it
Do you remember how Facebook's shares performed when they first went public?  They dropped.  They lost more than half their value in six months.



It was an illogical situation.  Did another one happen again?

Why I'm long
In June 2017 I wrote an article for Seeking Alpha on a powerful valuation method called the Ohlson Clean Surplus (OCS) and as part of it, I ran a valuation on Facebook.  I wasn't long the stock, hadn't looked at it before and I also knew it would present challenges for the model and part of my article was how to deal with challenges.  I had no expectations.

The OCS needed to be modified to allow for the company's growth but it was so high that it just rattled the model.  I had to use pared back growth rates just to keep it from being ridiculous.

I also noticed that although the stock price was growing rapidly, it by no means was keeping pace with earnings CAGR.

The growth rate wasn't the only fa…

This was the second article in the $NVO triad, published in October 2017.  It revisited the original analysis framework to see if anything had changed and in fact it had.  The quality of earnings, super high in the first article, slipped a bit, but the target price increased.

https://seekingalpha.com/article/4113793-novo-nordisk-still-buy

The purpose of this post to showcase the kind of analysis INVRS is capable of.  Please note that the circumstances that led to the original buy recommendation are no longer in play.

I'm going to create links back to some of the articles I've written for Seeking Alpha.  I can't reproduce them in full because of a publishing agreement.

The first links will be from a series of three stories on $NVO.  It includes the very first article I wrote which identified a mispricing in $NVO.  The stock gained about 68% is less than a year.

The balance of the articles kept tabs on the situation as time progressed and new information arose. Here is the first one.

First $NVO article.

The date on the article is January 2017.  Please be aware that the circumstances that created the opportunity are no longer in play.

22nd Century Group, Inc. - Smoke and Mirrors?
Overview: 22nd Century Group, Inc. is a plant biotechnology company focused on changing the level of nicotine and nicotinic alkaloids in tobacco plants and levels of cannabinoids in cannabis plants through genetic engineering and plant breeding. Its products include X-22, modified risk cigarettes, spectrum government research cigarettes, magic 0 and magic 2, moonlight, red sun, variable nicotine-level research cigarettes, and verfola.  Founded: 2011 Number of Employees: 79 Headquarters: Clarence US CEO: Henry Sicignano, III, MBA Analysis Methodology After doing some background research on XXII it became clear that the story I need to investigate is whether XXII is a credible company.  Some analysts outline XXII's promising future with their strong intellectual property and the good fortune to be in the business they'e in at this point in time.  Others present what appears to be a well researched tale of fraud and misdirection. The…

Morgan Stanley Presents a Rare Conjunction Overview: Morgan Stanley provides investment banking products and services to its clients including corporations, governments, financial institutions and individuals.  It operates though the following business segments: Institutional Securities, Wealth Management and Investment Management.  The Institutional Services segments provides financial advisory, capital-raising services and related financing services on behalf of institutional investors.  The Wealth Management segment offers brokerage and investment advisory services covering various types of investments, including equities, options, futures, foreign currencies, precious metals, managed futures, separately managed accounts and mutual fund asset allocation programs.  The Investment Management segment provides equity, fixed income, alternative investments, real estate and merchant banking strategies.  The company was founded by Harold Stanley and Henry S. Morgan. Founded: 1935 Number …