Nestle – Good Food, Good Life – Good Health?

Will Nestle be taking a second look at their slogan, Good Food, Good Life, adding in Good Health as they announce plans to invest over $500 million to “pioneer a new industry between food and pharmaceuticals”? We look at investor sentiment in Nestlé and existing pharmaceutical giants which could very soon be direct competitors of Nestle including Sanofi-Aventis (SAN), GlaxoSmithKline (GSK), Pfizer (PFE) and existing competition Danone (DNE).

Looking at investor sentiment in Nestle SA (NESN), short interest is low holding at less than 1% over the past three months. However, it has fallen over the past two weeks from 0.95% to 0.65%. However, this slightly bullish sentiment from the short market is contrasted by a fall in institutional ownership from 800 million to 760 million shares over this period.

Sanofi-Aventis could one day be competing with Nestle through its diabetes drugs. R&D may be tied because of its hostile bid to takeover Genzyme Corp, which might explain why short interest has increased from 1.8% to 2.6% total shares outstanding on loan over the past month. Funds who lend have been increasing their positions over this period from 245 million to 265 million shares.

Shares in GlaxoSmithKline have seen a good rally over the last quarter, reaching levels close to 1300p. However, institutional ownership has fallen from 1200 million to 1120 million over the last three months. Short interest stands at a low on 0.4% total shares outstanding on loan.

Taking a glance at the US pharmaceutical giants, which are likely to be keeping a close eye on Nestlé’s advances in to their territory, we look at Pfizer. Investor sentiment in Pfizer is bullish. Whilst the stock price has been following an upward trend since July, funds who lend have also been increasing their positions in the stock over the year. The lendable quantity, Data Explorers’ proxy for institutional ownership has increased from 1700 million to 2000 million. Short interest stands at a low of 0.2%.

Finally, some analysts have been turning to Danone for insight given that the company has invested heavily in this newly sought out segment. However, they have expressed some scepticism given the time it has taken for Danone to penetrate this market. Looking at Data Explorers content, we see a bullish outlook for Danone. Short interest has been maintained at a low of 1% on average over the past year. Institutional ownership indicates growing positive sentiment as it has increased from 105 million to 135 million since February earlier this year.