Should Novartis Be in Your Portfolio?

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With shares of Novartis (NYSE:NVS) trading around $81, is NVS an OUTPERFORM, WAIT AND SEE, or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

Novartis engages in the research, development, manufacture, and marketing of a range of healthcare products worldwide. Its portfolio features medicines, eye care, cost-saving generic pharmaceuticals, preventive vaccines and diagnostic tools, over-the-counter drugs, and animal health products. The company operates in five business segments: Pharmaceuticals, Alcon, Sandoz, Vaccines and Diagnostics, and Consumer Health. Its core products and services are prescription medicines; surgical, ophthalmic pharmaceutical, and vision care products; generic pharmaceuticals, human vaccines, and blood-testing diagnostics; as well as over-the-counter medicines and animal health. In a growing healthcare field, Novartis provides key products and services.

Speculation surrounding a merger between Novartis and Roche Holding Ltd. is unwarranted, said Novartis chair Joerg Reinhardt, according to a Reuters report Sunday. Reinhardt said that although its true the two companies will be working more closely, there are no plans for a merger. “Two pharma groups working in the same location have many topics in common,” Reinhardt said. Both Novartis and Roche are based in north-western Switzerland, in Basel. Reinhardt’s response echoes earlier statements from the chair this past year; in August, he was asked whether the two companies wanted to remain independent: Reinhardt replied with a resounding “absolutely.”

Reinhardt has been exchanging e-mails with Roche’s new chair Christoph Franz, who was nominated for the position at the end of March last year. The Novartis chair also added that he had recently met Franz’s predecessor, Franz Humer, a few weeks ago, according to Reuters. Novartis’ Chief Executive Severin Schwann has also previously denied speculation of a merger between Novartis and Roche. In October, Bloomberg and similar news outlets reported that the Chief Executive held a conference call with reporters in which he stated, “Nothing has changed with regards to Roche’s position towards Novartis. The families Hoffman and Oeri have repeatedly stated they’re committed to Roche’s independence.”

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