In an attempt to calm fears of a US based recession, I thought I would begin writing a 7 part series on Investing in Sin.  The purpose is not to display specific lifestyles, but to illustrate a contrarian method of stock selection that identifies defensive stock plays to protect one's portfolio in case we are (or are not) in a recession. 

Those of us here in the Fingad.com community come from many diverse backgrounds in terms of culture, religious beliefs, and educational backgrounds. Granted we all have our differences, but we can all agree there certain "No No's" for each of our practiced religions. I was raised under the Christian faith, and was subsequently taught the specifics of the Seven Deadly Sins, which will serve as my underlying story line for the remainder of these articles. 

<u>The Basic Concept</u>

If we plunge into recession (global or country specific), one of the best areas of the market to invest are the basic needs and desires that we as humans find essential to our survival and allow us to enjoy the precious time we have on the 3rd big rock from our sun.

The trick is - finding the companies that are poised to take the lead in supplying or resolving the products/services in question. Now then, without further adieu, let me introduce you to...

GLUTTONY

When most of us think of Gluttony, we think of lazy and/or lethargic individuals who refrain from physical activity or spend too much time eating at Kentucky Fried Chicken. Therefore, it took very little time to chose a wide spread and deadly disease that follows gluttony hand in hand... Diabetes.

As many of you know, diabetes is an incurable (to date) disease caused from several different factors. Obesity is often one of the main culprits of this life threatning disease.

In fact, the Centers for Disease Control (CDC) and the World Health Organization (WHO) have gone so far as to classify obesity as a global epidemic due to its leading role in heart disease and certain types of cancer.

Often considered an affluent-only condition, epidemiologists have concluded that obesity is definitely a global problem requiring immediate action. However, it doesn't take a PhD in psychology to understand that people will continue to a high calorie, high fat diet due to its taste appeal.  Thus, obesity will pose a seemingly impossible disease to cure.  

All of this reasoning points to a strong demand for treatment products for those afflicted with diabetes, as well as a rapidly growing market of potential LIFELONG customers thanks to the increasing popularity of fast food chains in non-US markets from companies like McDonalds and Yum! Brands (Kentucky Fried Chicken, Pizza Hut, Taco Bell), as well as increasingly educated work force that generate a sedentary lifestyle.
 

<u>The Business Minded Person Checklist</u>

• We have a growing number of customers (diabetics) with no end in sight
• A constant demand for our product
• Once the patient is diagnosed, it soon equates to a consistent revenue stream. 
• Increasing global health standards will allow undetected cases will be more accurately diagnosed, equating to new patients.

I SMELL OPPORTUNITY RISING!

<u>Novo Nordisk A/S (ADR)</u>

Novo Nordisk A/S (NYSE:NVO) is a pharmaceutical/medical device company focusing upon insulin treatments for those afflicted with diabetes. Based in Denmark, NVO is currently the world's largest producer of insulin based treatments.

With an estimated 250 million people currently classified as a diabetic, and an estimated 450 million more classified as a "pre-eminent" diabetic, the demand for NVO's products are quite staggering. In fact, when considering that obesity affects an estimated 60% of Americans (CDC data), and the rapid introduction of western based, high calorie foods into the Asian markets, demand is likely to skyrocket in the next 5 to 10 years. At present, an estimated 40 to 45 million diabetics reside in India and China, which will likely increase in the near future.

The stock value is up a very generous 37% over the last year, and a whopping 353% over the last 5 years (Chart #1).

Chart 1: 5 year chart of Novo Nordisk A/S

With a P/E in the low 20s, it presents an attractive purchase price. The basic fundamentals could not be better for NVO. The company grew profits by 32% in 2007 and has guided analysts higher for 2008 expecting a minimum net profit increase of 25%.

<u>Summary</u>

Novo Nordisk is a company whose products are in very high demand, and will continue to be in demand for the foreseeable future.  Being the world leader in the insulin supplier market, and having many distributing partnerships located all over the world, it is poised for a strong and prosperous future. 

Disclaimer:  Author does not have a position in Novo Nordisk at the time of publishing (02/05/2008).  This article is not a recommendation, but an informational resource only.