In Uncertain Times, Investors Should Focus on High-Quality Companies
Ever hear of International Holdings Co. PJSC?
Eh… me neither, until recently
It’s turns out, the company is surviving the new depression quite well, thank you very much. Bloomberg tells us that in the last year, the shares are up an astounding 2,819%.
That’s nearly 30-fold in a year!
Of all companies with a market value of over $1 billion, International Holdings is the single-best performing stock in the world. The shares are already up another 351% this year. That’s amazing.
So what does International Holdings Co. PJSC… you know… do? Well, that’s not so easy to answer. It’s an Abu Dhabi-based investment holding company. Last year, it got most of their revenue from—ready for this?—fish farming in the United Arab Emirates.
International Holdings has had a few acquisitions in recent months, but nothing too big. In fact, trading volume has been unusually light. The stock averages about 30 trades per day.
Not much is known about the company except that its price goes up, up, up. But why is it so popular? Well, that’s a bit of a mystery.
Frankly, I’m going to take a pass on International Holdings Co. PJSC, but I wish the company well. As an investor, I prefer more concrete companies with consistent operating histories.
Too often, investors think there’s a shortcut to investing success. In reality, successful investing is pretty dull. It’s about finding good companies that do something very well, and watching them do it again and again. It’s like an endless game of betting that what’s expected to happen, will happen. As Ring Lardner famously spun Ecclesiastes: “The race is not always to the swift nor the battle to the strong—but that’s the way to bet.” That’s what good investing is all about.
Danaher Is One of the Most Consistent Stocks Around
In that vein, one of my favorites rock-steady stocks is Danaher (DHR). If you’re not familiar with the company, it’s the investment vehicle run by the Rales brothers. The Rales brothers, who named the company after a creek in Montana where they used to go fishing, like to buy cash-flow rich, niche businesses at a discount.
Danaher mostly stays out of the limelight, but the shares have done extremely well in the long term. Its parent company owns a hodgepodge of different businesses. For organizational purposes, Danaher’s three segments are Life Sciences, Diagnostics, and Environmental & Applied Solutions.
Since 1990, shares of Danaher are up more than 23,000%. Check out the long-term chart:
The S&P 500, the blue line, almost looks flat in comparison. That’s how strongly Danaher has performed against the overall market.
I especially like some of the moves Danaher has made recently. General Electric got itself into trouble and the company has been selling off assets to shore up its financial position. GE sold off its biopharma unit to Danaher for a cool $21.4 billion. I think Danaher got a great deal. They just closed on the deal and renamed the biophrama business Cytiva.
What makes the GE deal interesting is that GE’s current CEO is Larry Culp. He used to be Danaher’s CEO.
Danaher recently reported Q1 earnings and the company had another solid quarter. For the first three months of 2020, Danaher earned $1.05 per share, beating Wall Street’s consensus by four cents per share. The company had 4.5% core revenue growth in each of its three business segments. In the last year, free cash flow is up 21%. I should also note that Danaher has shopped 30 million diagnostic tests for COVID-19.
Danaher also said that Executive VP Rainer M. Blair will take over as CEO later this year, when current CEO Thomas P. Joyce Jr. retires. Joyce has done a great job leading Danaher.
This is a good time to give Danaher a good look. For one, the shares are down with the rest of the market. Also, shares of DHR dropped after the company said it will raise $2.5 billion in a share offering of common and convertible stock.
I expect to see Danaher continue to make big gains as the economy reopens. It’s probably a better long-term bet than fish farming in UAE.
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