Fundamental Short Selling Research

Eric Fernandez, CFA

TwoRiversAnalytics

Equity Bottom-Up

Danaher designs, manufactures, and markets life science research tools, analytical instruments, reagents, consumables, and software as well as environmental  products and services. The company has over 20 businesses organized in three segments:  Life Sciences, with 51% of LTM revenues, Diagnostics with 32% and Environmental with 17%.
 We recommend selling DHR stock short (selling/avoiding for long managers).  The key elements of our short thesis are laid out below.
<ul>
<li>Sales spiked in Danaher’s Life Sciences and Diagnostics segments soon after the Covid pandemic surfaced.  These sales are unsustainable, in our view.</li>
<li>Danaher has weak organic growth, masked by a string of acquisitions.</li>
<li>
EBITDA margins added 1000bps over the past year, which we view as unsustainable.  </li>
<li>
The Covid pandemic will end through vaccination, therapeutics and natural attenuation resulting in the end of artificially inflated demand for Danaher’s products. </li>
<li>
We view estimates as too high with analysts largely extrapolating from current trends and levels.  
</li>
<li>
The stock is very expensive.  
</li>
<li>The company takes acquisition-related write-offs and benefitted from a reversion to lower tax rates last quarter.</li>
<li>
Potential Catalysts: We expect Danaher to show slower growth and lower margins which will cause a rerating of the stock and a cut in multiples.</li>
<li>
Risks:    Additional Covid variants could reignite the pandemic. We believe that is unlikely with the rapidly rising rates of global vaccination and the parallel development of therapeutics and additional vaccines.</li>
</ul>
 For further details, see the report below, and formatted PDF attached.

Danaher designs, manufactures, and markets life science research tools, analytical instruments, reagents, consumables, and software as well as environmental  products and services. The company has over 20 businesses organized in three segments:  Life Sciences, with 51% of LTM revenues, Diagnostics with 32% and Environmental with 17%.
 We recommend selling DHR stock short (selling/avoiding for long managers).  The key elements of our short thesis are laid out below.

Sales spiked in Danaher’s Life Sciences and Diagnostics segments soon after the Covid pandemic surfaced.  These sales are unsustainable, in our view.
Danaher has weak organic growth, masked by a string of acquisitions.

EBITDA margins added 1000bps over the past year, which we view as unsustainable.  

The Covid pandemic will end through vaccination, therapeutics and natural attenuation resulting in the end of artificially inflated demand for Danaher’s products. 

We view estimates as too high with analysts largely extrapolating from current trends and levels.  


The stock is very expensive.  

The company takes acquisition-related write-offs and benefitted from a reversion to lower tax rates last quarter.

Potential Catalysts: We expect Danaher to show slower growth and lower margins which will cause a rerating of the stock and a cut in multiples.

Risks:    Additional Covid variants could reignite the pandemic. We believe that is unlikely with the rapidly rising rates of global vaccination and the parallel development of therapeutics and additional vaccines.

 For further details, see the report below, and formatted PDF attached.

ダナハー社（DHR）：収益過多説に基づき空売り。