David Burrows Thermo Fisher Scientific TMO-N WEAK BUY Sep 04, 2024

Touches all aspects of bio-pharma industry. For example, helps run pharmaceutical trials, and helps build and design new drugs. Everything you need, such as electron microscopes, to create new drugs and products. 

Weak coming out of Covid, as there was too much inventory in the system. Now primed to see revenue growth reaccelerate. Last time, Trump was favourable to healthcare and biotech. Low multiple relative to its historical average. Yield is 0.3%.

The merger doesn't take effect until Jan. 1; she see few changes after the merger. Price has disappointed post-Covid, given inventory and interest rate hurdles. With rates falling, she expected health care to resume, but she thinks that spend is delayed. The stimulus in China will help. With the new US president, we also don't know what will happen to this sector. But she likes TMO's fundamentals, and would buy at these levels.

Has longed liked this and it's long been a good performer, but it has struggled since peaking in end-2021 and pulled back in 2022, and sideways ever since. TMO benefitted in 2020-1 as drug companies spent a fortune dealing with Covid and needed TMO's medical machines. From Oct. 2023 to Sept. 2024, shares rose 51%, but is down 18% since then. But they last reported a mixed quarter: a slight miss in revenue though a slight beat in earnings and soft guidance. It sold off and hasn't stopped, though announcing a $4 billion share buyback last month helped. He expects a graudal improvement as business picks up int he next two years. Trades at only 22x PE 2025 vs. 30x historically, so it's cheap now.

2023 and 2024 were challenged due to overhang with inventory. Will benefit from talk of deregulation of healthcare in the US. In spite of flat pricing for products, dividends still grow between 11-20%. Defensive, high-quality name, sleep at night, just let it ride. Yield is 0.3%.

Their rate of growth in revenues is declining and it's not a cheap stock.

Gorilla in their space. Does a lot of acquisitions. Either no dividend, or it's very small. White House actions have provided an opportunity to buy healthcare names at a discount. Likes it long term; would add to portfolio if got cheap enough. Still quite expensive.

Not inclined to buy at this time. Chart shows the stock's not trading well. Covid was rocket fuel, but earnings have been flat to slightly down since then. Lots of White House noise about cutting funding for scientific research. Domiciled in US, but 50% of business is global export sales; EU escalated again today, there will be retaliatory tariffs.

Lower highs, lower lows. Unless you have a very strong conviction on the fundamentals, wait for things to change. Something is going on. Avoid. Remember Nortel:  story was great, but the chart told a different story.

Challenging year or two. Did well during Covid, then had to normalize. Then rising interest rates impacted spending in biotech. Chinese market's been very soft. Not growing at historical pace, but this should normalize. New US administration's focus on healthcare costs may impact some of TMO's clients.

In the end, one of the leaders in the space. Diverse and extensive international client base. Over the long term, healthcare is a very attractive industry to be in, mainly due to demographics. Attractive multiple.

He owns Danaher, which is as bad as TMO. Don't buy this until there's a pick-up in Chinese orders.