Tapering Fears?

Market Summary:  

The U.S. equity markets started last week out strong upon the heels of continued positive economic data.  However, the run was short-lived and markets declined mid-week upon Fed Chairman Ben Bernanke’s comment that the central bank might moderate the pace of bond purchases later this year due to an improving economic outlook.  While negative in the short-term, for those investors possessing a longer-term outlook, tapering fears have created a welcome entry point for equities.  Whether the Fed continues or tapers intervention in the future, either scenario has the potential to favor equity markets over other asset classes in the long-term.  Looking ahead to this week, investors will keep an eye on durable goods orders and new home sales reports as key economic indicators as well as any further indication on the Fed’s plans.

The S&P 500® was down 2.1% for the week.  The top-performing sectors in the S&P 500® Index included Energy (-1.6%) and Financials (-1.9%), while bottom-performing sectors included Utilities (-2.9%) and Telecommunications (-3.7%). In the fixed-income market, the 10-year Treasury yield rose during the week, ending at 2.5%.

We continue to seek those companies possessing identifiable catalysts, and focusing on those stocks with favorable odds.

Consistent Earnings Growth

Danaher Corp. (DHR), headquartered in Washington, D.C., is a designer, manufacturer and marketer of medical, industrial, professional and consumer products. DHR was founded in 1969 and was previously known as DMG, Inc., but later took the Danaher name in 1984. The company produces a broad range of products including electronic calibration equipment, retail/commercial petroleum products such as underground storage tank leak detection systems, high-precision optical systems for the analysis of microstructures and aerospace defense articles, among others. DHR’s primary product lines are sold in North America, Europe and Asia.

DHR has a long history of delivering consistent earnings growth through continual development of its own businesses and by acquiring businesses that are fast growing and have high returns.  Over the years, the company’s management team has demonstrated skill and discipline in selecting and integrating its many purchases.  A more recent purchase included an expansion in the water treatment industry.  This industry has strong growth potential and now DHR is a key beneficiary of this trend. Economic uncertainties have depressed DHR’s multiples, and as a result we have been presented with this buying opportunity. In the long-term, we expect DHR to outperform its peers and the market.