It’s hard today, November 30, to find any stock with the kind of momentum that I’m looking for in the last month of 2021.
Apple (AAPL) looks like a good possibility, which is why I made it Pick #5 in my Market Melt Up Special Report on my subscription site JubakM.com and why I added the shares to my Jubak Picks and Volatility portfolios.
Danaher’s (DHR) momentum is less obviously–especially on a day like today when the stock has closed down 1.87% to $320.42.
But take a step back. The stock was up 4.08% for the last week (before today’s loss) and up 4.73% in the last month as of the November 29 close. (For the year shares were up 47.27% as of the November 29 close.)
And the stock was one of the few in the market to show a gain on Friday’s plunge on fears of the Omicron virus variant.
And that’s because this life sciences and diagnostics company is one of the few that will see higher revenue from a new surge in Covid-19 infections. Danaher makes tools necessary for developing drugs, including filtration, separation, and purification technologies. It also has a role in Covid testing.
You can see that exposure in the company’s last quarterly report.
In the quarter, Danaher saw core revenue growth of a bit above 20%, above the company’s initial guidance for growth in the mid- to high teens. Adjusted EPS of $2.39 was up 39%, moderately above consensus at $2.15 a share. The company’s diagnostics segment led the way with 29% core revenue growth due to surge in the Delta Variant in the quarter, which led to more testing for the virus. The life science segment delivered core revenue growth of 20% as the Pall water filtration and Cytiva bioprocessing tools continued to benefit primarily from COVID-19 vaccination efforts. Danaher also increased its order backlog from vaccine makers to $2 billion exiting fiscal year 2022. Previously, the company guided to $1.5 billion in vaccine contribution to revenue. It also reiterated expectations for $45 million in Covid testing sales in fiscal year 2022.
The fear before the emergence of the Omicron Variant is that those trends could disappoint if it looked like Covid-19 was running its course.
But with the emergence of Omicron, it likes like we’ll see a need for more testing and for more work to improve existing vaccines. Today, November 30 Moderna (MRNA) CEO Stephane Bancel told The Financial Times interview that he expects existing vaccines to be less effective against the new Omicron Variant. (On the other hand, BioNTech (BNTX) co-founder Ugur Sahin told the Wall Street Journal that vaccinated people will most likely be protected from a severe course of illness by existing vaccines.)
While the emergence of a new variant of Covid-19 may give Danaher momentum for an end of the year rally, which is why I’m making it Pick #6 in my Special Report on JubakAM.com, I originally added the shares to my Jubak Picks Portfolio back in June 2017 because of its exposure to the life sciences sector (and it’s high growth rates) and it’s focus on filtration (and thus water purity. In other words I saw this as a water stock)
The shares are up 276.12% from that initial pick as of November 30. At today’s close of $320.42 the stock is well above my target price of $292.00 a share. But I see no reason to sell ahead of current momentum and on the long-term strength of the business. I’m raising my target price today to $378 a share.
