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Gone Fishin' With Danaher


Danaher is a long-term growth story that should not be ignored.


"Look out, Mama, there's a white boat comin' up the river
With a big red beacon, and a flag, and a man on the rail..."
-Powderfinger (Neil Young)

If you've been playing along at home with me over the last few weeks you have come to realize how important music is in my daily life.

Powderfinger was one of the first songs that I played over and over again in failed
attempts to try and figure out what Mr. Young was talking about. Over the years it meant different things to me at different times but this morning when I heard it the first thing that came to mind was Danaher (DHR).

Conceived in the early 1980s while on a fishing trip on the Danaher, a tributary to the south fork of the Flat Head River in western Montana, Danaher is one of the best-run publicly traded companies that virtually no one outside of Wall Street has ever heard of. The brainchild of both Steven and Mitchell Rales, the mandate for Danaher was simple enough: grow at an accelerated rate by making acquisitions that strengthen existing businesses while establishing new platforms.

And growth by acquisition is exactly what it has done over the last two decades. And for a very long time the market rewarded it in terms of stock price appreciation. However, as the accounting scandals from WorldCom and Enron rocked the markets earlier this decade, investors took a "shoot first, ask questions later" stance with Danaher - the theory being, with as many deals as it had made to date, there had to be some skeletons in its closet. But much to the chagrin of the nonbelievers, Danaher was in fact squeaky clean - and since the fall of 2002 the stock hasn't looked back - trading from $27 up to the current levels of $78.50.

Danaher reported a ho-hum 2Q back on July 19 and gave at best tepid guidance for the 3Q. But earnings announcements have never been the story here. The real value to me has always been their incredible diversification of businesses allows them to easily navigate through the less-than-clear macro environment we currently find ourselves in the midst of.

In Danaher's nondescript headquarters at 2099 Pennsylvania Avenue in Washington, DC, things have never looked better. Under the leadership of current CEO H. Lawrence Culp, Jr., Danaher has, according to its website, "established leadership positions in Medical Technologies and Product Identification markets while more than doubling total revenues to nearly $10 bln."

Danaher is a long-term growth story that should not be ignored and, thanks to Neil Young's Powderfinger, the stock is firmly back in the middle of my radar screen!

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No positions in stocks mentioned.

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