We're adding to our position in this robust medical technology player

Published Tue, Feb 28 20231:30 PM ESTUpdated Tue, Feb 28 20231:51 PM EST

We are buying 15 shares of Danaher (DHR) at roughly $248.34 apiece. Following Tuesday's trade, Jim Cramer's Charitable Trust will own 495 shares of DHR, increasing its weighting in the portfolio to about 4.76% from 4.62%. Like many other companies in the health-care space, Danaher has had a rough start to the year as the market has shifted its focus away from those stocks and back to the formerly-battered tech sector. Despite the company's strong fourth-quarter earnings beat in January, shares of Danaher are down about 11% since late January. Still, our focus on quality and fundamentals means we've viewed Danaher's extended pullback as a buying opportunity. DHR 1Y mountain Danaher (DHR) one-year performance. Indeed, part of Danaher's post-earnings side related to management flagging stocking headwinds at its Covid-19-focused bioprocessing business. Uncertainty remains over how long those challenges will persist. But given our strong confidence in Danaher's management team, we're inclined to take their word that the trough for the bioprocessing unit should come in the current quarter. Management also has a stellar track record of execution, guiding conservatively and then handily beating expectations. Moreover, another reason to stick with Danaher is for its breakup catalyst . Before the end of 2023, Danaher plans to separate its environmental and applied solutions unit, which provides water solutions, into an independent company. The trimmed-down Danaher should command a higher price-to-earnings multiple from the 25-times forward earnings estimates it currently trades at because it's shedding a slower-growing, lower-margin asset. The new Danaher, focused more squarely on its life sciences and diagnostics businesses, will be less cyclical with a higher percentage of recurring revenues – roughly 80%, compared to 45% in 2015. If Danaher were to pursue an initial public offering of its water business, the proceeds raised would pad Danaher's balance sheet with billions of dollars for any potential future acquisitions. The spinoffs of industrial conglomerate Fortive, in 2016, and dental segment Envista, in 2019, coincided with some of Danaher's most transformative acquisitions — including GE Life Sciences , in 2020. Notably, Bloomberg earlier this month reported that Danaher was interested in acquiring life sciences firm Catalent (CTLT). Although the initial reaction to this news was mixed, the market should not lose sight of the strategic opportunity of such an acquisition, which would allow Danaher to offer production outsourcing to its biopharmaceutical customers. It would be a cross-selling opportunity for Danaher, with the potential for significant margin expansion. Correction: This article has been updated to accurately reflect that Jim Cramer's Charitable Trust is on Tuesday buying 15 shares of Danaher (DHR), at roughly $248.34 apiece. (Jim Cramer's Charitable Trust is long DHR. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust's portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.

The medical field has served as a proving ground for new technologies many times. Biomedical engineers merge medical science with engineering.

Jorge Dirkx | AFP | Getty Images