Danaher (DHR, Financial) is a global leader in life sciences that maintains a portfolio of businesses primarily focused on bioprocessing, life science tools, genomics and diagnostics. In our view, Danaher has an excellent track record of creating shareholder value through smart capital allocation and world-class operational execution. The firm’s Danaher Business System employs a rigorous, process-driven approach to operational improvement that’s helped accelerate organic growth and expand margins through multiple leadership regimes. Danaher’s business mix has shifted dramatically in recent years after a series of transformative acquisitions and divestitures. We believe these portfolio moves leave the company attractively positioned in some of the industry’s fastest growing, most profitable niches. The upgraded portfolio contains premiere assets levered to secular growth areas, like biologics, molecular diagnostics, and genomics, that support many years of high-single-digit revenue growth and margin expansion. Near-term headwinds related to the pandemic are overshadowing this attractive long-term outlook. Danaher sells diagnostic tests and critical inputs needed for manufacturing Covid-19 vaccines. Robust demand for these products during the pandemic boosted the stock price in 2020 and 2021. As Covid-19 demand normalized, Danaher experienced sales headwinds and channel destocking on these products, which pressured the stock. We believe these near-term headwinds will ultimately prove short-lived. Danaher now trades at a discounted valuation relative to peers and private market transactions, which provided an attractive entry point to invest in this high-quality, resilient business.
From David Herro (Trades, Portfolio)'s Oakmark Global Fund second-quarter 2023 commentary.
