Oakmark Funds: “We expect Novartis (NVS) Will Deliver Mid-Single-Digit, Top-Line Growth”

Oakmark Funds, a long-term value investment management firm, published its “Oakmark Global Fund” fourth quarter 2020 investor letter – a copy of which can be seen here. A return of 29.45% was recorded by the fund in the fourth quarter of 2020, outperforming both its MSCI World benchmark that had a 14.0% gain, and its Lipper Global Fund Index that delivered a 16.2% return in the same period. You can view the fund’s top 5 holdings to have a peek at their top bets for 2021.

Oakmark Global Fund, in their Q4 2020 investor letter, mentioned Novartis AG (NYSE: NVS) and emphasized their views on the company. Novartis AG is a Basel, Switzerland-based multinational pharmaceutical company that currently has a $196.7 billion market capitalization. Since the beginning of the year, NVS delivered a -7.43% return, while its 12-month gains are still up by 10.25%. As of March 26, 2021, the stock closed at $87.41 per share.

Here is what Oakmark Global Fund has to say about Novartis AG in their Q4 2020 investor letter:

“Novartis is one of Europe’s largest pharmaceutical companies and possesses a highly diversified portfolio of innovative products. Its share price underperformed both the broader market and its pharma peers during 2020, largely due to a few disappointing late-stage trials and the company’s lack of Covid-19-related therapeutics or vaccines. These short-term issues provided us with an attractive entry point to invest in a leading pharmaceutical franchise with compelling economics. We estimate that the market is currently ascribing almost no value to Novartis’ pipeline despite the company’s excellent track record in new drug development. We expect that Novartis will deliver mid-single-digit, top-line growth and expand margins over the next five years as a result of its cost-savings plan. The company possesses one of the most diversified product portfolios in the pharma industry with 15 $1b+ compounds, which reduces its reliance on any single compound.”

Our calculations show that Novartis AG (NYSE: NVS) does not belong in our list of the 30 Most Popular Stocks Among Hedge Funds. As of the end of the fourth quarter of 2020, Novartis AG was in 23 hedge fund portfolios, compared to 25 funds in the third quarter. NVS delivered a -1.29% return in the past 3 months.