Novo Nordisk Isn’t in The “Magnificent Seven,” but Here’s Why I Think It Should Be

The “Magnificent Seven” are helping lift major U.S. indexes to record highs. This group of highly acclaimed stocks — among the heaviest-weighted equities in the S&P 500 — is comprised of Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla. There are good reasons to invest in all seven of these corporations, and that’s why they’ve performed so well in recent years.

However, some companies outside this clique are just as impressive and deserve to be considered on par with the Magnificent Seven. One of these corporations is Novo Nordisk (NYSE: NVO), a Denmark-based pharmaceutical giant. Here’s why this drugmaker has earned consideration for inclusion in what would be called the Magnificent Eight.

A longtime leader in diabetes care

Novo Nordisk has been around for several decades. Throughout its entire history, the company has been a leader in one key therapeutic area: diabetes care.

Through the development of various novel insulin products and other medicines aimed at diabetics, Novo Nordisk has helped contain this severe global health crisis. The company’s ability to maintain a lead in this market, despite stiff competition from various other players, is impressive.

As of November 2023, Novo Nordisk had a 33.8% share of the worldwide diabetes market, up almost 2% year over year. The company is still innovating in this area, too. Last year, it submitted regulatory applications for icodec, a potential once-weekly insulin product, in the U.S., Europe, and China.

Here’s why this matters: Diabetes patients who need insulin typically take it daily. A once-weekly option is more convenient, and eligible patients will be thrilled to make the switch.

Icodec should earn approval sometime this year if everything goes according to plan. Novo Nordisk’s dominance in diabetes care has generally yielded solid financial results.

NVO Revenue (Quarterly) Chart

The performance of the company’s stock has also been strong, with returns in the past decade that have been far better than that of the broader market. The Magnificent Seven are so named partly because of their ability to deliver outsized returns, clearly a point in Novo Nordisk’s favor.

Expect more of the same

Novo Nordisk is making noise in another related therapeutic area — obesity care. The company’s weight loss medicine Wegovy became so popular that the demand outpaced the supply. The company is dealing with the issue of shortages as the anti-obesity drug market is projected to soar through the end of the decade.

The pharmaceutical giant has plenty of competition, including from its longtime rival in the diabetes market, Eli Lilly. And Amgen, Pfizer, and Viking Therapeutics are among the drugmakers looking to launch their own weight loss medicines.

Investors shouldn’t be worried, though. As Novo Nordisk has shown before, it can handle the competition. The company’s Wegovy should remain one of the top-selling obesity therapies for some time.

It’s also working on newer targets. Novo Nordisk recently reported highly encouraging phase 1 results for a potential oral diabetes medicine called amycretin.

The company has created a culture centered around innovation, particularly within its core areas of expertise. That’s a key reason why leaders in certain therapeutic areas generally remain near the top of their fields.

Novo Nordisk is also looking to diversify its lineup. Its pipeline features medicines across rare diseases, cardiovascular conditions, neurological disorders, etc.

Novo Nordisk checks all the same boxes as the existing Magnificent Seven. These corporations are all innovative leaders in their respective industries and have delivered strong financial performance and stock market returns for a while — and they’ll likely continue to do so. The shoe fits — and that’s why Novo Nordisk has earned its spot here.

It doesn’t matter if someone creates a new Magnificent Eight that includes Novo Nordisk. Investors should consider adding the company’s shares to their portfolios.

Should you invest $1,000 in Novo Nordisk right now?

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Prosper Junior Bakiny has positions in Amazon and Meta Platforms. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, Pfizer, and Tesla. The Motley Fool recommends Amgen and Novo Nordisk and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.

Novo Nordisk Isn’t in The “Magnificent Seven,” but Here’s Why I Think It Should Be was originally published by The Motley Fool