SELL/SHORT – partial long hedge with Glaxo
NOVN VX: CHF 78.25
August 6, 2014
We recommend selling/shorting Novartis. We have highlighted in various long/short MRPT reports the overvaluation of Novartis within the global pharma space. We re-iterate our bearish view on Novartis based on significant overvaluation and lack of growth. Moreover, not that we ascribe a lot of value to that kind of voodooesque analysis, but the charts “look” horrible.
Novartis is most mean reverting with Glaxo and Sanofi. Interestingly it is not mean reverting vs. “across the street” competitor Roche of which it owns 33%. We have recommended recently in our MRPT model a long GSK / short NOVN position which was closed for loss limit reasons. On value/fundamental grounds we continue to recommend this long/short trade. However, given the overvaluation of Novartis and the very extended relative performance of the sector vs. the MSCI World Index, we would recommend such long/short trade with a SHORT BIAS (the timing is a bit off for long SAN FP/short NOVN, but this is also a justifiable trade).
FULL REPORT ATTACHED
Relative value: NOVARTIS