With roughly one third of the global branded diabetes treatment market, Novo Nordisk is the leading provider of diabetes-care products in the world. Based in Denmark, the company manufactures and markets a variety of human and modern insulins, injectable diabetes treatments such as GLP-1 therapy, oral antidiabetic agents, and obesity treatments. Novo also has a biopharmaceutical segment (constituting roughly 10% of revenue) that specializes in protein therapies for hemophilia and other disorders.

As worldwide markets struggle in the environment of higher interest rates, conflict in the Middle East, and the lingering battle between Russia and Ukraine, one thing has not changed. U.S. stocks are more expensive than global stocks. And with the large run-up in stock prices in late 2023 and the first half of 2024, U.S. stocks are even more expensive. Consider P/E ratios. The trailing P/E ratio on the S&P 500 is 27, above the global average of 14 and well above the 6-12 average for P/Es on stocks in emerging markets. A review of yields tells a similar story. The current dividend yield for the S&P 500 is 1.3%, versus the global average of 2.8%, and Asian, Australian, and Latin American yields of 3%-5%. The foreign region that does not completely fit the pattern is the Middle East. The average P/E on a stock in Saudi Arabian is a relatively high 16.5. This can be blamed on high oil prices. One reason investors generally are willing to pay a higher price for North American securities is the transparency of the U.S. financial system as well as the liquidity of U.S. markets. As well, global returns can be volatile across individual countries, given currency, security, political, and geopolitical risks. Indeed, U.S. stocks (ETF SPY) have outperformed EAFE (ETF EFA) over the past year as well as over the past five years. Even so, we recommend that growth investors have approximately 5%-10% of their equity allocations in international stocks in order to take advantage of the value, and we have been adding global stocks to our Universe of Coverage.

Market sentiment is a secondary indicator -- and many times being contrarian and going against the crowd will hurt you in the stock market. Extreme bullishness can go on for months or years without a big decline in share prices. Extreme bearishness is better for timing the market because stocks most often go down faster than they rise. Market participants can be correct for long stretches during a bull market, but at the end of a massive advance, they often are hung out to dry. Sentiment is a lagging indicator that mostly is based on price action and volatility. When the market trends higher on a consistent basis, the masses feel like geniuses and load the wagon with stocks. This has happened now with the semiconductor stocks that are already benefiting from AI (or those that will soon be), especially since early 2023. But something strange is afoot, as some sentiment indicators are exhibiting a healthy dose of fear while the major indices are at/near all-time highs. Hedge fund exposure to stocks has fallen off a cliff, while there are very low readings from the CNN Fear & Greed Index. One might think this is a contrarian bullish sign, but pessimism toward stocks in a strong uptrend historically is a warning. For stocks to go higher, more and more market participants need to get bullish and fund the ever-rising prices. Interesting indeed! For the market, the major indices and the stocks that have done the heavy lifting look tired and in need of a rest. (Mark Arbeter, CMT)

With roughly one third of the global branded diabetes treatment market, Novo Nordisk is the leading provider of diabetes-care products in the world. Based in Denmark, the company manufactures and markets a variety of human and modern insulins, injectable diabetes treatments such as GLP-1 therapy, oral antidiabetic agents, and obesity treatments. Novo also has a biopharmaceutical segment (constituting roughly 10% of revenue) that specializes in protein therapies for hemophilia and other disorders.