Gordon Reid Danaher Corp. DHR-N BUY ON WEAKNESS Nov 24, 2023

Benefitted huge from Covid, but sales from China's sales hit the stock in 2023, but comps will improve in 2024. There remains demand for their products.

They did well during Covid, but fell off a cliff after the pandemic and as interest rates climbed. But they bought GE's healthcare business 5 years ago and paid that off in 3 years because of their strong cash flows. Eventually, DHR will come back and is starting to. A good entry point now.

Great company. Acquires and integrates well. More positive things to come in the healthcare segment, good value there. Wouldn't be the top name as an industrial.

Benefits from aging boomer population. Many sales in China, which is on the verge of a recession/depression. As China starts to turn around, DHR will pick up. Defensive healthcare name that he likes for most portfolios.

DHR is expensive at 28x forward earnings and it has not been able to fully recover to its all-time highs in 2021 when it traded above $330. DHR has been trading quite choppily since. It is flat year-to-date but up 11% over the last year. We do think that DHR could be a good long-term healthcare play and some of the current risks/fears due to the new US administration may be slightly overstated for healthcare stocks. 
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In recent years, DHR has been in the process of transforming itself from an industrial conglomerate into a pure life science and biotech player with a high degree of recurring revenues by divesting legacy industry assets. The company now possesses a solid profile of highly recurring revenue and strong margins, basically a “software-like” business model.

However, weak organic growth has caused the company’s shares to trade largely sideways in recent years. DHR also repurchased shares aggressively in the recent quarter, which the company did not implement for a long time, indicating that management believes shares are undervalued. That being said, DHR is trading at 28.4x Forward P/E with low single-digit revenue growth, which is certainly not that attractive. However, this is not the company’s issue but rather an industry-wide challenge, as similar headwinds also exist with other players like TMO.

Consensus estimates expect DHR to grow its topline by 7% on average over the next few years. We think now could be a good time to average into the position, but maybe not be too aggressively. We would be comfortable starting a position but only adding more when revenue returns to a solid growth trajectory.
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He bought this in early 2022, though it was mired in an inventory glut. He's stuck with it ebcause he expected it to bounce back. It still has a high PE though. Is down 19% from its August high, but is now a good entry point. An analyst just upgraded it. He expects the healthcare sector to come back next year.

Likes it and they have performed well in the past, but as of late DHR has seriously underperformed. He's getting restless.

Expensive at 28x PE with tepid revenue growth. They're talking cost cutting, which is encouraging for profits, but it's making up for fundamental weakness.

The CEO is not doing an appropriate job. He wishes he didn't own this. Wants to see the board act.