To my annoyance, Novartis did not dip the other day when world markets sold off. In fact, it went UP. So I didn't get a chance to pick up more on sale.
The strength may be ascribed to the just-released sales report for the first nine months. The headline figure was an increase of 21 percent. However, this was in Swiss francs -- in local currencies, sales overall were only up a much less spectacular 8 percent.
Still, earnings were up 27 percent in the first half (there was no profit report for the third quarter), and the company expressed confidence that this momentum would continue through the year. One must conclude that the anticipated cost savings from the merger are materializing as expected. With the tail-wind of positive currency translation, this is leading to a much greater bottom line growth than an increase in local unit volume would otherwise justify.
(I don't like relying on currency to goose earnings -- currency translations can just as easily go against you. But cost savings are less ephemeral -- though still not as nice as unit growth.)
Anyway, if I get the chance to buy Novartis again in the mid- or low 70s, I'm jumping on it.
By the way, I hope this experience foreshadows the same effect for Pharmacia and Upjohn, a multi-national drug merger that has gone as badly as the Sandoz-Ciba-Geigy went well. PNU has such bloated costs, there is a lot of room for improvement by the aggressive new CEO, Fred Hassan. So I own PNU as well (also has a nice dividend).
Good investing
Chuck Edwards |
