We recently made a list of the 10 Best Global Stocks To Buy Now. In this piece, we will look at where Novo Nordisk A/S (NYSE:NVO) ranks among the top ten global stocks to buy.
With the third quarter of 2024 ending, the discourse on the stock market for global equities has shifted back to interest rates. This comes after artificial intelligence drove markets through the course of the year, but with interest rate cuts having commenced in Europe and China’s economy refusing to roar back, global equity investors are carefully parsing through their investments to see which stocks might be worth it.
This was the gist of a note released by Goldman Sachs in July. In it, the bank advised investors to sift through stocks to eliminate those that have exposure to China. This is because Chinese economic growth has remained sluggish, and after Q2 GDP growth figures for the Asian economic giant sat at 4.7%, Goldman and Citi slashed their GDP growth estimates for 2024 to 4.7%. The two banks’ earlier estimates were 4.9% and 4.8%, and in its European investor note, GS’ analysts raised alarm for several potential headwinds for European firms that could emanate from China. The top three of these were a weak demand in China for discretionary products, the country’s plans to tax luxury goods, and potential retaliatory tariffs against European countries after the EU decided to increase tariffs for Chinese made electric vehicles. “While a great deal of earnings downgrades have already occurred year-to-date for our luxury basket, we worry that more could take place,” the Goldman analysts warned, adding that “the valuation premium of the basket has deflated, but remains on the high side of its history.”
A slowdown in Chinese consumer spending, which was also evident in the country’s latest data release that saw retail sales growth sit at 2%, is particularly worrisome for German stocks. This is because they have already felt the pinch of the slowdown during Q2 and H1 2024. For instance, German watch company Swatch saw its China sales drop by 30% in H1 while the luxury goods manufacturer LVMH experienced a 14% Asian sales drop in Q2 which came after Mercedes-Benz’s China sales dropped by 3% in Q1.
For Germany, this is particularly troubling as its economy has suffered after the disruption of cheap Russian gas in the aftermath of the Ukraine invasion. The German economy contracted by 0.3% in 2023 and continued its downward pace in Q2 by posting a 0.1% sequential contraction. German firms’ disappointing Chinese performance came when the country’s overall exports to China dropped by 14% annually in May to sit at €7.5 billion.
Shifting gears, let’s take a bird’s eye view of global stocks. On this front, JPMorgan has some insights. In its mid year outlook, the bank’s chief global economist Bruce Kasman shared that “Global growth has moderated to a still-solid 2.4% (annual rate) and is less dependent on a U.S. demand engine, as recoveries in Western Europe and emerging markets (excluding China) find firmer footing. The manufacturing sector is also showing signs of recovery, helped in part by a pickup in business spending.” However, in the report which was published in July, the bank remained pessimistic about inflation as it shared that core inflation should sit at 3% at the close of 2024. This led it to wager that higher for longer was the way to go and led to a cumulative 35 basis points of easing in developed markets except Japan by 2024 end.
Yet, the European Central Bank (ECB) led the global charge for rate cuts. It cut interest rates by 25 basis points in June and followed it with another 25 basis point cut in September. Additionally, the Bank of England (BOE) also cut rates by lowering rates by 25 basis points to 5% in August for the first interest rate cuts since the coronavirus pandemic was wreaking havoc in 2020. Moving forward, analysts are divided on the BOE’s future rate cuts, and many believe that the ECB might be less forthcoming with the cuts as well.
While several of the world’s biggest economies have suffered this year, global stocks as a whole have performed well. One of the most well known global stock indexes compiled by the MSCI opened at 3,144 points this year. Its latest value is 3,728 to mark a neat 18.5% year to date growth. However, European stocks have lagged in this performance, with the index of the region’s top 600 stocks having delivered a 10.2% return year to date through price appreciation. This is unsurprising since these 600 firms’ Q1 2024 EPS dropped by roughly 2.5%. However, estimates suggest that these stocks can post at least a 10% EPS growth during Q3 2024.
Our Methodology
To make our list of the best global stocks to buy, we ranked the US listed stocks of JPMorgan’s International Equity ETF by the number of hedge funds that had bought the shares in Q2 2024 and picked the top stocks. This particular ETF was preferred because it chose to focus on a diversified set of global stocks as opposed to several others that focused primarily on US tech giants.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
An investor in a suit representing the company, seated in front of a long table of global leaders discussing the company’s investments.
Novo Nordisk A/S (NYSE:NVO)
Number of Hedge Fund Holders In Q2 2024: 67
Novo Nordisk A/S (NYSE:NVO) is a specialty Danish pharmaceutical and biotechnology company that focuses on developing and selling treatments for diabetes, weight loss, and rare diseases. Courtesy of its weight loss drug Wegovy, the firm has managed to grow its revenue by 31% between 2022 and 2023. However, 2023 has also seen a markedly different environment for Novo Nordisk A/S (NYSE:NVO)’s weight loss drugs as Eli Lilly’s Zepbound secured FDA approval. in November. Now, with the US government upping the stakes on making drugs affordable through Medicare, reports suggest that Wegovy will be under the radar quite soon. This could create headwinds for Novo Nordisk A/S (NYSE:NVO), as the firm has already struggled with sales after lowering the prices of its weight loss drug. However, its considerable resources, as evidenced by cash and equivalents of $7.9 billion coupled with a specialty focus on diabetes have allowed Novo Nordisk A/S (NYSE:NVO) to have a robust drug pipeline. Two new drugs that it is developing are amycretin and CagriSema, and the stock could respond favorably to positive regulatory news.
Polen Capital mentioned Novo Nordisk A/S (NYSE:NVO) in its Q4 2023 investor letter. Here is what the fund said:
“As we discussed in last quarter’s commentary, Novo Nordisk is a newer addition to the strategy. Over the fourth quarter, we continued to build the position to an average weight. As a reminder, Novo Nordisk is a global pharmaceutical company based in Denmark and has long been the leader in developing insulin for diabetes patients. In recent years, the company’s innovation into GLP-1 drugs has been shown not only to help diabetics control blood sugar levels but also to have significant efficacy in weight loss. Obesity has become a global epidemic, creating materially negative knock-on effects for humans that range from an increase in cardiovascular events and, thus, higher mortality to a lower general quality of life. We believe that, over time, payors will recognize the value of these obesity treatments to both patients and the overall healthcare system.”
Overall NVO ranks 2nd on our list of the best global stocks to buy now. While we acknowledge the potential of NVO as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than NVO but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published on Insider Monkey. All investment decisions should be made after consulting a qualified professional.