Novartis (NVS): Conservative growth plus dividend

By Timothy Lutts, Chief Investment Strategist and Editor of Cabot Stock of the Month
From Cabot Wealth Advisory 1/31/11 Sign up for free Cabot Wealth Advisory e-newsletter

It’s pharmaceutical giant Novartis (NVS), which is headquartered in Basel, Switzerland, but does business in 140 countries all over the world. Created in 1996 from the merger of Ciba-Geigy and Sandoz, the company generated $51 billion in revenues last year. Its biggest market was the U.S., accounting for 32% of revenues. Its biggest revenue-generators included Gleevec, Diovan, Lucentis, Amoxicillin, Augmentin, Claritin, and Excedrin. And it’s growing at a good pace, in large part by acquiring smaller competitors with valuable properties. Last year it acquired eye care giant Alcon.

In the fourth quarter of 2010, Novartis saw revenues grow 10% from the year before, to $14.5 billion. Profit margins were 18.7%. And the dividend yield was a solid 3.0%.

It’s not a hot stock; NVS is owned by some 600 mutual funds, most of which are in for the long haul. But it is decently valued.

In fact, the latest issue of Cabot Benjamin Graham Value Letter says that the stock, currently trading at 56, can be bought anywhere under 55 … buying low gets you a Margin of Safety. And it can be held until at least 72.90, above which it will be overvalued and therefore carry excessive risk.

I think it’s a good choice for conservative growth investors who like the stability of some income from dividends.

Tim LuttsTimothy Lutts

President, Chief Investment Strategist, Editor of Cabot Stock of the Month

Timothy Lutts heads one of America’s most respected independent investment advisory services, publishing eight newsletters to more than 165,000 subscribers around the world. Tim leads a dedicated team of professionals who serve individual investors with high-quality investment advice based on time-tested Cabot systems. Under his leadership, Cabot has been honored numerous times by both Timer Digest and the Hulbert Financial Digest as among the top investment newsletters in the industry. Tim also edits Cabot Stock of the Month.