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The week's question
In March 2025, in the thread "Re: OT, out", Umm asked the members: "Do you think it is because America is made up of magical soil that makes businesses based in America magically profitable?" This week it is put to everyone again. The button below opens the small thread re-asking it - read what others have said so far, then give your own answer as an ordinary reply.
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Investment Strategies / Falling Knives
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Author: mungofitch ✹✺ SILVER
SHREWD
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Number: of 1198 
Subject: Re: FKA: NVO
Date: 01/28/25 3:29 PM
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No. of Recommendations: 2
I didn’t expect a Monaco resident to appreciate the dividend! Plus, it’s double counting. Those dividends are just part of the P.

It's true, I don't usually consider a yield when picking a stock. It's a downside for me, really. Dividends are highly taxed for me, whereas retained earnings generally show up as lightly taxed capital gains from a rising share price.

But
(a) I know some other investors appreciate a coupon, and
(b) it really is a small defence against a stock price that languishes for a long time. This is a very old fashioned view, but then again we haven't had a secular bear market for quite a while and people forget what they're like.

So although Novo’s P/E looks reasonable, the E is going to be challenged in the next few years and the ‘bargain price’ may just be the market applying the appropriate haircut.

Opinions differ. I think they'll earn quite a bit of money...probably. Predicting the stock price (or earnings) of any single drug firm is a mug's game, but my expectation is that they'll do OK or quite well. The rise of competition may whack their growth, but my minimally-informed opinion is that their own business will continue to do fine, probably not below recent levels within rounding error.

I think a program of repeated cash-backed near-the-money put writing against NVO (similar to, but different from, covered calls) could do quite well in the next few years, which is my tentative plan. I very much doubt they'll disappear.

Jim
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