Thermo Fischer Scientific

Thermo Fisher Scientific Inc. (TMO – NYSE) is a leading medical products and lab equipment supplier.  We were able to purchase the stock at 11 times earnings in the post-financial crisis period.  At the time, Wall Street analysts under appreciated the stock’s potential and the market offered this high quality business at an extremely low price versus what our analysis estimated its future earnings power to be.

Thermo turned out to be a very successful long-term investment for our investors.  Management’s integration of the Fisher distribution business with the innovative life science instruments business drove unique product and service offerings for customers.  This led to significant market share gains and ultimately much faster growth than the Street estimated.  With valuations reflecting most of the company’s ample future growth prospects, the stock hit our price target and we sold our position.

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Modest Expectations for TMO in 2011 & 2012

"We maintain our Neutral rating, as TMO’s increased focus on ROIC and commitment to emerging markets is offset by our view that long-term organic growth guidance is not sufficiently conservative."

Goldman Sachs analyst - 5/23/12

"Given what we view as limited visibility into end markets, weak relative geographic exposure, below-peer organic growth, a history of poor-ROIC capital deployment, and above-peer valuation, we view risk/reward as balanced and accordingly rate shares of Thermo as Neutral."

J.P. Morgan Analyst - 5/23/12

What We Saw

The sell-side analysts’ quotes above are typical of Wall Street consensus on Thermo at the time.  As we dug deeper, meet with the company’s management, their competitors and suppliers, it became apparent that significant shareholder value would be realized, if management could execute.  But, you had to be willing to be a patient, long-term investor and look beyond the next quarter’s earnings.  Our fundamental research identified…

  • Leading life science tools company trading at 11x p/e at time of purchase June 2012 (vs. market 16x)
  • Years of restructuring completed and equipment & service capabilities coordinated for the first time leads to market share gains
  • Organic growth accelerating to 3-5% with margin improvement drives 10% and EPS growth
  • Covid further highlights value of R&D as revenue accelerates, driving valuation to our price target in November 2020.
TMO vs HC vs RLV1000
TMO-Valuation-Forward PE

As of September 30, 2021 Thermo Fisher Scientific, Inc. comprised 0.00% of the fund.  Portfolio holdings are subject to change.  Past performance is not an indicator of future results.