Life sciences company Danaher has certainly not been an easy stock to own this year. A wave of startups going public on Wall Street would go a long way toward changing that. Year-to-date performance: down 0.1%. Forward price-to-earnings ratio: 27.8 versus a five-year average of 28.8. Our Rating: Buy Equivalent 1. Our price target: $305 per share. DHR YTD Mountain Danaher's year-to-date stock performance. '24 Review This year was marked by a recovery in the bioprocessing market, which had been under pressure due to increased inventory levels among major customers and limited financing for smaller biotech startups purchasing equipment and products from Danaher. Danaher's other theme was China, where economic growth struggled throughout the year and announced stimulus measures did not result in a significant increase in orders. That's really what made investing in Danaher such a frustrating year. Management has done a good job of doing its best to keep investor expectations in check for bioprocessing orders. As soon as business began to turn around and the shares gained some momentum, investors turned their attention back to the negative economic data from China. Despite all this, we have retained Danaher as one of twelve core investments in the portfolio. Why? Jim Cramer's Investing Rule #20: Patience is a virtue and abandonment of values is a sin. While Danaher may be trading at a premium compared to the S&P 500, we see a lot of value in this stock due to the longer-term attractiveness of its life sciences end market, including bioprocessing, and the quality of its management team, which we are always looking for new ways to get rid of slower-growing businesses and refresh the portfolio with an eye on multi-year growth. '25 Looking Ahead In addition to a continued recovery in bioprocessing, Danaher needs a recovery in the Chinese economy, which should lead to an increase in orders from customers in the country. In bioprocessing, large pharmaceutical customers are part of the business equation. With their inventories largely at the right size, new orders should accelerate. The other part of the equation is smaller startups, whose access to funding was severely impacted following the collapse of Silicon Valley Bank in March 2023. While lower interest rates can certainly lead to more private market financing, they should also improve the environment for IPOs. And a better IPO market is really good news for Danaher, as Jim explained during the monthly meeting in December. “One of the first things biotech companies do when they go public is place big orders with Danaher… That means to me that 2025 will be much better than 2024, even if China is no better.” said Jim. Don't get us wrong: growth in China is obviously desirable and our preferred outcome. But we also recognize that this year's sluggish performance will at least help make year-on-year comparisons with China easier in 2025. This could therefore have the effect of diverting attention away from the troubled region as investors understandably put an asterisk on Danaher's numbers there that it is simply out of management's control but should improve at some point. (Jim Cramer's Charitable Trust is long DHR. A full list of stocks can be found here.) As a subscriber to CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable foundation's portfolio. If Jim discussed a stock on CNBC television, he waits 72 hours after the trade alert is issued before executing the trade. THE INVESTING CLUB INFORMATION SET FORTH ABOVE IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY, ALONG WITH OUR DISCLAIMER. THERE ARE NO fiduciary duty or duty IN RECEIVING YOUR INFORMATION PROVIDED IN CONNECTION WITH THE INVESTMENT CLUB. NO SPECIFIC RESULTS OR PROFITS ARE GUARANTEED.
A worker uses a Pall Corp. manufactured machine during a demonstration of the clearance phase of flu vaccine production during a tour of a Sanofi Pasteur vaccine production facility in Swiftwater, Pennsylvania.
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Life sciences company Danaher certainly wasn't an easy stock to buy this year. A wave of startups going public on Wall Street would go a long way toward changing that.