Motley Fool: Growth potential and dividend yield

Danish pharma company Novo Nordisk (NYSE: NVO) is a big player in the GLP-1 drug market, with Wegovy (for weight loss) and Ozempic (for diabetes) being two core products that generate billions of dollars in revenue for its business.

Its share price crashed in late July after the company lowered its projections for the fiscal year, as growth was a bit slower than expected. And Novo Nordisk has been fighting a losing battle to keep knockoff versions of its popular drugs off the market. These two headwinds have resulted in the stock price falling by half over the past year.

There’s plenty of reason to remain bullish on Novo Nordisk. Even with the challenges it has faced recently, the company boasts a strong pipeline of products in development, solid revenue growth and promising growth prospects in diabetes treatment and weight management. In the first half of the year, total revenue rose 16% year over year.

The health care stock recently traded at a forward-looking priceto-earnings (P/E) ratio of only 14, which makes it look like an excellent deal given its long-term growth potential. While it is not having a great year, Novo Nordisk is likely to rebound. Patient long-term believers can enjoy a dividend recently yielding 3.2% while they wait. (The Motley Fool recommends Novo Nordisk.)

Ask the Fool

Q. What does being “long” or “short” on a stock mean? – N.N., Manhattan, Kansas

A. Most of us are “long” on our stocks. That means we have bought expecting the shares to increase in value. When someone “shorts” a stock, they are betting it will fall in value – so they borrow shares and sell them, hoping to buy replacement shares (to repay the loan) at a lower price later.

Shorting is a strange, but legal, thing to do. There are good reasons not to short stocks, though. For one thing, the company’s management will be working against you to make the business succeed. Even if a stock does lose much of its value, it can take a long time to do so.

Q. I read that electric vehicle maker Lucid executed a “reverse split.” Is that good? – D.Y., Clinton, Mississippi

A. Reverse splits are generally red flags. Consider a regular stock split, say one that splits 2-for-1. If you owned 100 shares trading at $50 apiece, after the split you would own 200 shares trading at around $25. The total value would be around $5,000 before and after the split.

Lucid Group had a 1-for-10 reverse split. If you had owned 100 shares presplit, when they were trading for around $2 apiece (total value: $200), you would end up with just 10 shares post-split, with the share price adjusted proportionately to $20 (total value: $200).

The fact that Lucid’s shares fell considerably below $5 each means the company was deep in penny-stock territory, and penny stocks tend to be risky. Lucid was and is facing challenges, as it has been delivering a lot fewer of its EVs than expected and is not yet profitable.

My dumbest investment

My most regrettable investing move was selling my 200 shares of Intuitive Surgical at $35 per share. – M.L., Syracuse, New York

The Fool Responds: We do not know exactly when you bought and at what price, so we do not know how much in potential gains you might have missed out on, but it could have been a lot. Intuitive Surgical, the leader in robotic surgical systems with a recent market value of $195 billion, has averaged annual gains of more than 25% over the past decade and more than 21% over the past 15 years. That’s enough to turn a $10,000 investment into $93,100 or $174,500, respectively.

Your regret is a common one, because most investors have regretted selling one or more terrific performers way too early – or not buying into them at all. (We hope you netted some profit on your sale.)

In the future, before selling a stock, you might think about how confident you are in its growth prospects. If you are on the fence about it, you might compromise and sell only a portion of your shares.

Intuitive Surgical is still growing, with its second-quarter revenue up 21% year over year. With a recent price-to-earnings (P/E) ratio of 73, its shares don’t look cheap, but then they rarely do.

Do you have a smart or regrettable investment move to share with us? Email it to TMFShare@fool.com.