“Armchair Trader Series” Recommendations
- Week Beginning -
Monday, March 30, 2020

by Ian Harvey

IMPORTANT NOTE: This is a recommendation and individual members can use their own discretion as to when to enter or exit!

You may also wish to read Stock Options Made Easy Trading Philosophy

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"Trading Capital Management"



Option Trade – Danaher Corporation (NYSE: DHR) Calls

Tuesday, March 31, 2020

** OPTION TRADE: Buy DHR JUN 19 2020 160.000 CALL at approximately $4.10.

Place a pre-determined sell at $8.20.

Also include a protective stop loss of $1.65.

Preamble.....

Danaher Corporation (NYSE: DHR) is one of the strongest companies you’ll run across. For 50 years, it’s been run by the Rales brothers. Their specialty is finding and buying overlooked niche companies with strong cash flow.

It’s a simple formula, and it’s been incredibly successful for them and their shareholders. Over the last 30 years, Danaher has crushed the rest of the market.

Danaher Corporation designs, manufactures, and markets professional, medical, industrial, and commercial products and services worldwide. The company's Life Sciences segment provides mass spectrometers; cellular analysis, lab automation, and centrifugation instruments; microscopes; and genomics consumables.

Further Information.....

The coronavirus pandemic has been playing havoc on most world economies, with stock markets hitting an all-time low, thereby affecting shareholders’ wealth. Notably, the NYSE and the S&P 500 have recorded a decline of 28.4% and 23.8%, respectively on a year-to-date basis. Projections of the outbreak's devastating long-term impact on world economy have unnerved investors.

In response to the U.S. economy slowdown, the Senate passed a nearly $2 trillion emergency relief package to support businesses, hospitals and households. Moreover, in an effort to mitigate the outbreak’s devastating effect, the Federal Reserve has come up with some bold measures. For the first time since the 2008 financial crisis, on Mar 15, the Federal Reserve slashed interest rates to zero to provide additional support to the financial system. Notably, this was preceded by a rate cut of 50 basis points by the central bank earlier this month.

Governments across the globe are working round the clock with public health response teams to protect the lives of people by ensuring the availability of personal protective equipment.

In response to the serious situation, several industrial conglomerates have also committed to support the government in fighting the pandemic by expanding their production line, providing healthcare products and services to customers on an emergency basis and taking precautionary measures for their employees.

And one of these is Danaher Corp. which has been taking pro-active measures to mitigate this coronavirus menace.

Danaher Corporation’s business subsidiary, Cepheid received the Emergency Use Authorization from the U.S. Food & Drug Administration for Xpert Xpress SARS-CoV-2.

Note, Xpert Xpress SARS-CoV-2 is a rapid molecular diagnostic test for qualitative detection of SARS-CoV-2, the virus responsible for causing COVID-19. This kit will likely be shipped to U.S. facilities by Mar 30.

“During this time of increased demand for hospital services, Clinicians urgently need an on-demand diagnostic test for real-time management of patients being evaluated for admission to health-care facilities. An accurate test delivered close to the patient can be transformative — and help alleviate the pressure that the emergence of the 2019-nCoV outbreak has put on healthcare facilities that need to properly allocate their respiratory isolation resources," said Dr. David Persing, MD, Ph.D., Chief Medical and Technology Officer at Cepheid.

Cepheid is a molecular diagnostics company and a subsidiary within Danaher Corporation's (NYSE: DHR) Diagnostics platform. The company develops, manufactures and markets easy-to-use molecular systems and tests.

Analysts Are Upbeat.....

Shares of Danaher have been assigned an average rating of “Buy” from the eighteen analysts that are currently covering the firm. One investment analyst has rated the stock with a sell recommendation, five have issued a hold recommendation and ten have assigned a buy recommendation to the company. The average twelve-month target price among analysts that have issued a report on the stock in the last year is $168.00.

Several equities analysts have recently commented on the company…..

  • Needham & Company LLC increased their price target on shares of Danaher from $167.00 to $187.00 and gave the company a “buy” rating in a report on Monday, February 3rd.
  • Bank of America lifted their price target on Danaher from $165.00 to $188.00 and gave the stock a “buy” rating in a research report on Friday, January 31st.
  • UBS Group boosted their price objective on Danaher from $165.00 to $176.00 and gave the stock a “neutral” rating in a research note on Friday, January 10th.
  • Robert W. Baird upped their price objective on Danaher from $160.00 to $175.00 and gave the company an “outperform” rating in a research report on Friday, January 31st.
  • Finally, Citigroup dropped their target price on Danaher from $195.00 to $160.00 and set a “buy” rating for the company in a report on Friday.

So…..

In 2016, Danaher bought Cepheid for $4 billion. Last week, the FDA announced emergency approval of Cepheid’s Covid-19 test. The current test has to be sent off to the lab and takes four days to get results. With Cepheid’s test, you can get the results in just 45 minutes, and the test can be done on-site. This is a huge development. Cepheid hopes to roll it out as soon as possible.

Now Cepheid has to ramp up production to meet a very high need. What’s interesting is that thanks to Danaher, Cepheid’s manufacturing capabilities have significantly improved. Danaher also owns Integrated DNA Technologies, which can help spread the adoption of the Cepheid test.

Danaher is normally a very sound stock, but with the share price down by 25%, it makes for a good value. Combined with a concrete advancement in the battle against coronavirus, Danaher is an excellent buy here.

Shares of Danaher traded up $2.24 during trading hours on Monday, hitting $140.82. The company had a trading volume of 4,766,688 shares, compared to its average volume of 3,403,359. The firm has a market cap of $96.48 billion, a price-to-earnings ratio of 34.77, and a PEG ratio of 3.14 and a beta of 0.96. The business has a fifty day moving average of $147.26 and a 200-day moving average of $147.34. Danaher Co. has a 12 month low of $119.60 and a 12 month high of $169.19. The company has a quick ratio of 4.86, a current ratio of 5.19 and a debt-to-equity ratio of 0.75.