“Recession-Proof Swiss Medical Company”

By Travis Johnson, Stock Gumshoe, August 20, 2007

Here we have another email ad for the Skousen Hedge Fund Trader, which has steered us toward both good and bad ideas lately (at least, good or bad if we’re looking at short term performance — which isn’t necessarily what Skousen is aiming for).

This one sounds pretty appealing when we have markets moving like they did last week:

“Safeguard Your Portfolio with This Recession-Proof Swiss Wonder Stock.”

This is a pharmaceutical company, with a very broad pipeline of drugs and solid and growing earnings. It’s also Swiss, which, as Skousen emphasizes, gives some nice diversification since it also gets us some Swiss Francs into our portfolio (though I assume the major market is still the US for them, so if the dollar dips further they may lose in that direction).

Skousen gives a few more clues: This company “owns more than 11% of the huge hypertension drug market, helped by its industry-leading drug.”

And some financial specifics: “recent quarterly sales rose 13% to $9.8 billion and net income climbed 19% to $1.64 billion.”

It has 138 projects in its development pipeline, which sounds like a lot to me.

So … big Swiss pharmaceutical company, with those financials, and with a strong hypertension drug? We don’t need any more of the clues that Skousen provided (or a subscription to his newsletter for $995) to tell us that this company is …

Novartis (NVS)

Skousen has some company with this pick, since it was also one of Porter Stansberry’s “Part D Compensation” teaser companies that we sleuthed out last week. No surprise, perhaps, I’ve picked up a few shares of this company myself in the last week after noticing how far some of the big pharmas have fallen, and analysts are generally pretty ebullient about this firm (which maybe doesn’t mean so much, since they were all over it in January when the price was up near $60, too (it’s around $52 at the moment).

Compared to other big pharmaceutical companies, this one doesn’t have a huge dividend — it’s under 2%, a far cry from Pfizer or Merck, among others. But it does have a big OTC business and is one of the largest generics manufacturers, so I must admit that I see Skousen’s argument as fairly compelling that this is more “recession-proof” than some stocks (though I wouldn’t make such a bold claim). I also have generally preferred foreign stocks to US ones of late, partly because of currency and partly because I’d like to get my foreign/US ratio up to about 50/50 in my stock portfolio.

There are certainly problems with Novartis, too, they had a drug pulled recently (as was included in a comment someone made on my Part D Compensation post) and I’m sure they will face lawsuits and patent expirations just like the other big guys, as well as political risk should government pressure come to bear on the pharmaceutical companies in general again. Their biggest drug doesn’t go off patent for another five years, however, so they’re not as troubled as Pfizer in that front.

Calling it recession-proof is probably an exaggeration, but I own this one myself so can’t complain or nitpick too much. It’s one of the larger companies in the world at a $120 billion market cap, so there should be plenty of information for you to absorb if you’re interested in checking this one out.

Novartis also makes Maalox, which is perhaps a nice way to open on a Monday morning: here’s hoping this week is a little bit less heartburn-enducing than last.

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