Is Thermo Fisher Scientific (TMO) a Recession Proof Investment?
Polen Capital, an investment management company, released its “Polen Focus Growth Strategy” fourth-quarter 2022 investor letter. A copy of the same can be downloaded here. The fund returned -0.28% net in the fourth quarter compared to a 2.20% return for the Russell 1000 Growth Index and a 7.41% return for the S&P 500 Index. In 2022, the fund returned -38.02% net compared to -29.14% and -18.22% returns for the Russell and the S&P 500 Indexes, respectively. Inflation, the Fed’s interest rate hikes, and revenue and earnings slowdowns of the fund’s holding companies led the fund to underperform in the quarter and the year. In addition, please check the fund’s top five holdings to know its best picks in 2022.
Polen Capital highlighted stocks like Thermo Fisher Scientific Inc. (NYSE:TMO) in the fourth quarter investor letter. Headquartered in Waltham, Massachusetts, Thermo Fisher Scientific Inc. (NYSE:TMO) provides analytical instruments, specialty diagnostics, and laboratory products and services to life science solutions. On January 18, 2023, Thermo Fisher Scientific Inc. (NYSE:TMO) stock closed at $580.05 per share. One-month return of Thermo Fisher Scientific Inc. (NYSE:TMO) was 7.59%, and its shares lost 1.38% of their value over the last 52 weeks. Thermo Fisher Scientific Inc. (NYSE:TMO) has a market capitalization of $227.493 billion.
Polen Capital made the following comment about Thermo Fisher Scientific Inc. (NYSE:TMO) in its Q4 2022 investor letter:
"Thermo Fisher Scientific Inc. (NYSE:TMO) is a leader in attractive end markets with a skilled management team who has demonstrated the ability to consistently and wisely allocate capital. It is the world leader in serving science. It is a globally scaled supplier serving more than 400,000 customers working within pharmaceutical and biotech companies, hospitals and clinical diagnostic labs, research institutions, and government agencies. Thermo provides many of the products and services that companies in these industries, particularly pharma and biotech, need to operate and drive science forward. The company manufactures and sells instruments, reagents, and consumables used for a wide range of applications in labs.
Sales are also well balanced geographically, including leading scale in emerging markets, according to our research.
The business meets all our financial guardrails. We view Thermo Fisher as an extremely durable business, and we expect mid- to high-single-digit organic revenue growth over the long term. With expanding margins and wise capital deployment, we expect mid-teens underlying earnings per share growth over the next three to five years.
We also think Thermo Fisher’s business would be very durable in an economic downturn as pharma and biotech customers account for roughly 60% of the company’s sales today and roughly 80% of sales are highly recurring consumables and services. Thermo received a COVID boost as they supply COVID PCR tests as well as some products used in the production of COVID vaccines. As such, it is in the process of growing over that excess demand. We expect the company to move past this growth headwind by the back half of 2023. At approximately 24x our estimate for nexttwelve-months earnings per share, we believe Thermo’s valuation is attractive for this type of consistent, well-managed, and durable business."
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Thermo Fisher Scientific Inc. (NYSE:TMO) is in 20th position on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 92 hedge fund portfolios held Thermo Fisher Scientific Inc. (NYSE:TMO) at the end of the third quarter, which was 93 in the previous quarter.
We discussed Thermo Fisher Scientific Inc. (NYSE:TMO) in another article and shared Mormon Church’s 15 biggest stock positions. In addition, please check out our hedge fund investor letters Q4 2022 page for more investor letters from hedge funds and other leading investors.
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Disclosure: None. This article is originally published at Insider Monkey.
