Basic Materials and Chemicals Sector Ideas

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Danaher -- >>> The 10 best stocks in the world


Nov 21, 2012

Kiplinger



http://money.msn.com/investment-advice/the-10-best-stocks-in-the-world-1



Stock symbol: DHR

Danaher was an industrial conglomerate made up of disparate cyclical businesses. In 1990, management decided to restructure the company to make it less sensitive to changes in the economy.

The company turned to designing, manufacturing and marketing professional, medical, industrial and commercial products and services. The wisdom of the strategy proved itself in 2009 as the nation struggled with the recession precipitated by the financial crisis, says Morningstar analyst Daniel Holland. Although revenues of many of its rivals were cut in half that year, Danaher saw its sales drop only about 12% and bounce back nicely in 2010. Revenues and profits have continued to rise by double-digit percentages. Second-quarter profits and sales jumped 31% and 28%, respectively, from the year-earlier period.

Danaher's corporate culture is dedicated to being both innovative and efficient, Holland says. He notes that growth in the Washington, D.C., company is fueled primarily by acquisitions, adding that this is something Danaher does unusually well. Danaher's latest purchase, of Beckman Coulter last year, has not only proved profitable, it has put 40% of the company's sales in the rapidly growing health care sector.

But Holland is most impressed by how well the company has diversified, both geographically and within industries. Cyclical companies usually have a weak spot -- but not Danaher, he says. "There's no one single bullet that can take them down."

About 60% of the company's revenues come from outside the United States, including about 25% from emerging markets.

At about $52 recently, Danaher sells for 16 times estimated 2012 earnings of $3.24 per share. That's a reasonable price for a company that's expected to grow by about 15% per year for many years, Holland says. Besides, he says, Danaher's price-to-earnings ratio always tends to be higher than that of its peers. "When you've got a rare item, it's often expensive."

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