- As a result of COVID-19, we are already observing significant changes in areas such as consumer purchasing preferences, human communication, and workflows.
- Our newest growth theme focuses on companies that will be mid- to long-term beneficiaries as we come out on the other side of the pandemic.
- We expect Danaher to benefit as the free movement of people will need to be balanced with safeguards against infectious diseases.
There is still much uncertainty surrounding COVID-19, but it is becoming clear that there will be notable differences between our pre- and post-pandemic worlds. Across the business landscape, we are already observing significant changes in areas such as consumer purchasing preferences, human communication, and workflows.
Once the dust settles, we believe companies across a multitude of industries will be beneficiaries. We look beyond those businesses that have simply benefited from a closed economy. To meet our investment criteria, they must offer strong and durable growth potential over the long term. We have identified many businesses that have been resilient and strong during the COVID-19 crisis and that, in our view, are likely to become even stronger in the aftermath.
Companies across a multitude of industries could be beneficiaries once the dust settles.
"Viral effects" is our newest durable growth theme
Our thematic approach is a critical part of our investment process. Together with a team of analysts, we examine global trends as well as problems and potential solutions. From this analysis, we identify which themes could drive sustained growth for businesses over a multi-year time horizon.
The "viral effects" idea developed through our discussions about COVID-19-related behavioral trends and potential changes across a multitude of industries. We considered what will be different as we come out on the other side of the pandemic, what the new normal will look like, and which companies will benefit in a radical and durable way.
Policy makers will need to balance the openness of economies and free movement of people with safeguards against infectious diseases.
Potential beneficiary: Danaher (DHR)
One example of this theme in our portfolio is Danaher, a company that develops leading-edge diagnostic tools. We believe diagnostic testing for all types of viruses will become prevalent. Policy makers will need to balance the openness of economies and free movement of people with safeguards against infectious diseases.
Several of Danaher's portfolio companies, such as Cepheid, Pall, IDT, and Radiometer, are delivering a significant tailwind to its growth. Cepheid's rapid molecular COVID-19 test was first to market and provides results in under 45 minutes. The company will ship six million units per quarter. We believe that increased testing and the buildout of a more robust pandemic infrastructure will support normalized mid-to-high single-digit revenue growth for Danaher for several years.
Active management: A benefit in times of changing markets
As active managers, we are able to take advantage of shifting market and economic conditions. Our intense focus on portfolio positioning and downside risk may be especially beneficial with swift and unexpected events such as the COVID-19 pandemic. As always, we are taking a patient and methodical approach while using market weakness and dislocations to add to existing holdings or to initiate new positions.
Learn more about the performance and thematic approach of Putnam Large Cap Growth Fund.
As of 3/31/20, Danaher represented 2.39% of Putnam Large Cap Growth Fund assets. (Cepheid, Pall, IDT, and Radiometer are part of Danaher's portfolio.)
For informational purposes only. Not an investment recommendation.
This material is provided for limited purposes. It is not intended as an offer or solicitation for the purchase or sale of any financial instrument, or any Putnam product or strategy. References to specific asset classes and financial markets are for illustrative purposes only and are not intended to be, and should not be interpreted as, recommendations or investment advice. The opinions expressed in this article represent the current, good-faith views of the author(s) at the time of publication. The views are provided for informational purposes only and are subject to change. This material does not take into account any investor’s particular investment objectives, strategies, tax status, or investment horizon. Investors should consult a financial advisor for advice suited to their individual financial needs. Putnam Investments cannot guarantee the accuracy or completeness of any statements or data contained in the article. Predictions, opinions, and other information contained in this article are subject to change. Any forward-looking statements speak only as of the date they are made, and Putnam assumes no duty to update them. Forward-looking statements are subject to numerous assumptions, risks, and uncertainties. Actual results could differ materially from those anticipated. Past performance is not a guarantee of future results. As with any investment, there is a potential for profit as well as the possibility of loss.
Diversification does not guarantee a profit or ensure against loss. It is possible to lose money in a diversified portfolio.
Consider these risks before investing: International investing involves certain risks, such as currency fluctuations, economic instability, and political developments. Investments in small and/or midsize companies increase the risk of greater price fluctuations. Bond investments are subject to interest-rate risk, which means the prices of the fund’s bond investments are likely to fall if interest rates rise. Bond investments also are subject to credit risk, which is the risk that the issuer of the bond may default on payment of interest or principal. Interest-rate risk is generally greater for longer-term bonds, and credit risk is generally greater for below-investment-grade bonds, which may be considered speculative. Unlike bonds, funds that invest in bonds have ongoing fees and expenses. Lower-rated bonds may offer higher yields in return for more risk. Funds that invest in government securities are not guaranteed. Mortgage-backed securities are subject to prepayment risk. Commodities involve the risks of changes in market, political, regulatory, and natural conditions. You can lose money by investing in a mutual fund.
Putnam Retail Management.