TIP857: S&P Global, Novo, Deckers Brands w/ Stig Brodersen, Tobias Carlisle, & Hari Ramachandra

Novo Nordisk was described as a strong business whose share price had fallen about 40% from its 52-week high, leaving it at roughly 12 times forward earnings, around half the S&P 500’s mid-20s-or-higher multiple. Hari Ramachandra noted that sales and earnings compounded at about 19% annually from 2021 to 2025, even as operating margin fell from the 50% range to about 40%. His base case is that Novo becomes second to Eli Lilly in obesity and diabetes, with lower efficacy but a potential cost advantage. Lilly has about 60% market share and better weight-loss results from tirzepatide, though patient responses vary and several drugs could coexist in a large market.

Ramachandra expects mid-single-digit earnings growth and a 4.5% dividend yield, with five-year annual returns around 8–9%, or about 10% including dividends. The dividend exceeded free cash flow last year as cash flow fell below net income, partly because of factory investment for Novo’s obesity pill, which he estimated at about $2 billion in annualized revenue. Risks include Medicare price negotiations starting next year, expired semaglutide patents in several countries, and patent cliffs in 2030–2032. Novo has guided sales lower and may not have a replacement blockbuster by 2030. Its foundation control can support long-term decisions but limits shareholder influence.

Novo’s upside case depends on improved competitive performance and on success beyond its historical focus on insulin, diabetes, and obesity. Ramachandra identified amycretin, now in phase 3 trials, as a leading pipeline candidate, with results expected by 2028. He said successful newer drugs could raise annual returns to 18–22%, but called that difficult to model. The competition with Lilly is an efficacy race, and Novo’s investment case partly depends on regaining efficacy leadership.

Stig Brodersen called S&P Global a wide-moat business with a long growth runway and said he had opened a 1% position at $399 per share. He estimates intrinsic value at $450–$500 and potential returns of 10–15%, with a possible doubling over five years. Ratings generate about half of operating income, and issuers pay for initial debt ratings and ongoing surveillance. One estimate put S&P Global’s share in attractive ratings markets at about 45%, versus about 40% for Moody’s; headline shares cited were 49%, 33%, and 14% for S&P, Moody’s, and Fitch. Issuers often use multiple agencies, and lacking a major-agency rating can raise borrowing costs.

S&P Global’s indices business contributes about 10% of revenue and 20% of operating profit; estimated operating margins were 69% for indices, 65% for ratings, and 24% for Market Intelligence. The company’s P/E fell from about 40 in 2021 to roughly 23 as earnings grew, which Brodersen attributed to valuation compression and sentiment rather than weaker business quality. Management’s 6–8% revenue-growth outlook strikes him as conservative, and he considers continued global debt issuance a reasonable bet. Private credit could take some ratings business, but those ratings earn roughly 70% less per dollar of debt and lack comparable surveillance fees. Brodersen would underwrite about 2% from buybacks, rather than the roughly 5% trailing shareholder yield, because some repurchases were debt-financed and the mobility spin-off provided cash; adjusted leverage was about 2.7, above management’s 2–2.5 target.

Market Intelligence generates close to $5 billion, according to Ramachandra, and includes Capital IQ, data feeds, enterprise software, and credit-risk solutions. Its terminal business faces competition from AlphaSense and Rogo, while AI could shift demand from terminals toward insights and reduce analyst numbers and terminal seats. Brodersen sees the offerings as potentially commoditized, says investors could assume flat rather than mid-single-digit segment growth, and argues even zero growth would not materially change his thesis. He cautioned that claims about proprietary data do not by themselves establish data quality. A possible Capital IQ spin-off could be shareholder-friendly, though separating Market Intelligence would mechanically raise the remaining company’s margins.

Tobias Carlisle described Deckers Brands, owner of HOKA and UGG, as less durable and more fragile than Novo or S&P Global, but much cheaper. At $77 per share, Deckers had a $10.6 billion market capitalization, $1.6 billion in net cash, no debt, and an enterprise value of $9.7 billion, or about 11 times earnings. Revenue through March 2026 was $5.5 billion, up 10%; HOKA growth slowed from 15.9% to 7.7% in the latest quarter, while UGG grew 8.2% to $2.74 billion. Carlisle sees clean products, loyal customers, independent directors, and a conservative balance sheet, but says reliance on two brands makes the business more vulnerable.

Carlisle attributed Deckers’ share-price decline from above $200 partly to tariffs, consumer pressures, and a market concentrated in AI beneficiaries. He also noted that higher interest and energy costs, student-loan repayments, and tariffs may make consumers delay purchases of roughly $200 shoes; competitors including On and Nike could constrain pricing or regain ground. Deckers directs about 80% of free cash flow to buybacks, and its share count fell 7% year over year, though Carlisle would also like management to buy shares on the open market. His bear, base, and bull cases imply $72, about $113, and $160–$161 per share, with probabilities of 20%, 60%, and 20%; the bull case requires consumer pressures to ease and HOKA growth to recover, which he considered possible but unlikely soon.