Danaher: Can Weather the Storm

Danaher (DHR) is a blue collar, large cap conglomerate that straps the hard hat on every day and delivers consistent profits quarter after quarter, year after year.

ABOUT:

Danaher Corporation derives its sales from the design, manufacture and marketing of professional, medical, industrial and consumer products. It operates in four segments: Professional Instrumentation, Medical Technologies, Industrial Technologies, and Tools & Components.

During the year ended December 31, 2006, it acquired Sybron Dental Specialties and Vision Systems Limited, in addition to other nine companies, which are manufacturers and assemblers of environmental instrumentation, medical equipment or industrial products, in the market segments of electronic test, critical-care diagnostics, water quality, product identification, and sensors and controls.

In July 2007, the Company acquired ChemTreat, Inc. In July 2007, the Company completed the sale of its power quality business to Thomas & Betts Corporation. As of November 21, 2007, the Company, through its indirect wholly owned subsidiary, Raven Acquisition Corp., had acquired over 90% interest in Tektronix, Inc.

FUNDAMENTALS:

Danaher is far from the small cap high flyers I often highlight, but in difficult markets it's the big, lumbering, profit machines that will weather the storms the best and Danaher is certainly one of those. According to Morningstar, the company has posted EPS growth in 9 out of the past 10 years and isn't yet showing any signs of slow down. EPS growth since 1997 has come in at 20.7%, 2.7%, 35.6%, 24.6%, (9.9%), 38.8%, 20.8%, 36.5%, 20% and 26.1% last year in 2006.

Growth for 2007 is expected to remain in line with historical growth with about a 20% rise in EPS. Revenue growth has been equally as solid over the years but it should be noted that revenue growth has been decelerating a bit in recent quarters, dropping from 22%, to 18%, 19%, 14% and 13% in the latest quarter. Still excellent growth for a company of this size. Combined with a very good Return on Equity of 17%, Net Margins that continue to rise as they have over the past 5 years and strong management ownership of over 20%, Danaher is top Self Investors large cap stock.

TECHNICAL:

The chart of DHR over the past 2 years provides a great example of how you might play a leading breakout stock, adding shares on each subsequent breakout. The first entry point was provided on a break from a long one year base at the beginning of 2006. It provided a 2nd entry point on a break from a new base in early October 2007 and a 3rd entry on a breakout this summer to yet another all time high. Despite a correcting market, DHR continues its bullish ways and has come away relatively unscathed over the past month and is looking poised to breakout from a flat base it's been working on since late September. The stock may provide a good entry on a breakout from this flat base above 86. Remember: the stocks that hold up the best during a correction will likely lead the market with big gains once the market gets going again.

Full Disclosure/Disclaimer: The stock of the day is by no means a buy recommendation. Please do your own research and make a personal decision based on your own tolerance for risk. I currently do not own a position in Danaher.