4. Thermo Fisher Scientific Inc. (NYSE:TMO)
Number of Hedge Fund Holders: 92
Morgan Stanley “firmly” believes in Thermo Fisher Scientific Inc. (NYSE:TMO)’s ability to “outgrow its peers and end markets driven by a combination of increasing exposure to high-growth verticals.” The firm also likes Thermo Fisher Scientific Inc. (NYSE:TMO)’s “relentless focus” on stock gains fueled by “the breadth, depth and reach of their portfolio.” Morgan Stanley has a $670 price target on Thermo Fisher Scientific Inc. (NYSE:TMO).
As of the end of the last quarter of 2022, 92 hedge funds tracked by Insider Monkey had stakes in Thermo Fisher Scientific Inc. (NYSE:TMO). The total worth of these stakes was over $7 billion. The most significant stake in Thermo Fisher Scientific Inc. (NYSE:TMO) was owned by Thomas Steyer’s Farallon Capital which owns a $640 million stake in the company.
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.”
