Your No. 1 COVID-19 Investing Opportunity
If you want to come out of the COVID-19 crisis with your stock portfolio intact, buy steady, reliable stocks.
And I have one such stock in mind right now.
It’s a company whose founder, George Hatsopoulos, I chatted with once, in my days as a financial journalist.
I interviewed him in the 1990s as a correspondent and anchor for PBS’ Nightly Business Report. He ran a powerhouse health care company helping lead the fight against a virus — HIV — with faster, automated testing machines.
What I remember most from the interview was Hatsopoulos’ brilliance and humble nature.
Much has changed since then. Hatsopoulos retired in 1999. The company merged with another health care business in 2006.
But the company continues to have a leading role helping health care researchers fight back against viral threats such as COVID-19.
And thanks to the panic sell-off of recent weeks, investors can now buy a reliably growing stock like this one at a reasonable valuation.
A Leader in the Fight Against COVID-19
The company we now call Thermo Fisher Scientific Inc. (NYSE: TMO) — originally named Thermo Electron — has been around since the late 1950s.
Today, its stock is down more than 16% from its all-time high in January.
TMO Lost 16% Since January
In mid-March, Thermo Fisher Scientific received emergency authorization from the Food and Drug Administration for its COVID-19 diagnostic test.
CEO Marc Casper told CNBC that the company would immediately start shipping out the first batches of 1.5 million kits, which can be administered at a doctor’s office or testing center. The firm aims to ramp up production to 5 million tests a week in April.
Thermo Fisher Scientific Is Hitting on All Cylinders
The way I see it, the COVID-19 tests are just the start of why its stock deserves a closer look from investors.
For one, Thermo Fisher Scientific — which makes scientific and diagnostic equipment, as well as lab supplies such as chemical reagents — is a company hitting on all cylinders.
It earned $12.35 a share in 2019 and despite the business interruptions of COVID-19, should generate as much as $13.37 a share in profits this year, rising to nearly $15 a share in 2021.
After the panic-selling of recent weeks, the stock is trading at a forward price-to-earnings ratio (P/E) of roughly 18.
That’s a rare undervaluation for a company known for its steady, reliable growth, and which typically trades at much higher P/E levels.
Presuming the stock moves back up to a P/E of 25 in the next 18 months or so, that would give Thermo Fisher Scientific a stock price of $380 — or 30% above the current level of the stock.
But there’s yet another reason to buy beyond the COVID-19 diagnostic system and the currently undervalued stock.
A New Tool for Detecting COVID-19
The company recently landed a whale-sized biotech acquisition with the $11.5 billion purchase of Europe’s Qiagen N.V.
A maker of molecular diagnostic tools and applied testing technologies, Qiagen has also been on the forefront of the COVID-19 rapid testing effort.
The company began shipping its own set of diagnostic testing kits in February. It followed up in late March by unveiling what it calls the first “syndromic” test for the virus as well.
The deal — announced at the start of March — already has the blessing of Wall Street analysts.
It adds one more tool to Thermo Fisher Scientific’s arsenal of weapons for detecting COVID-19 — and generating hefty profits for its shareholders in the process.
Best of Good Buys,
Editor, Total Wealth Insider
I like to think of myself as a former financial journalist who not only interviewed many of the world’s top stock market experts, entrepreneurs and financiers, but also took their advice to heart in becoming a successful investor himself.