Fresenius SE
One of our new buys in all but the Worldwide High Dividend Yield Value Fund during the quarter was Fresenius SE (XTER:FRE, Financial), a global healthcare conglomerate based in Germany. Its various businesses provide dialysis services (Fresenius Medical Care), generic injectable drugs, clinical nutrition and other intravenous products (Kabi). It also owns private hospitals in Spain and Germany. The dialysis and injectables/intravenous businesses operate in somewhat consolidated markets with high barriers to entry, while the hospital business is a less differentiated asset.
All of these businesses benefit from the secular demand growth of aging demographics and increasing per capita healthcare consumption. Over the medium term, management expects the company to grow its earnings at a mid-to-high single-digit rate. The company typically generates a low teens operating margin and earns a low double-digit ROE including goodwill. Its current dividend yield is 2.3%. Fresenius also has had substantial insider buying recently.
We bought Fresenius at ~10x EV/EBITA on a look-through basis. Alternatively, it was at ~70% of our estimated intrinsic value on a sum of the parts basis.
From Tweedy Browne (Trades, Portfolio) Fund's first-quarter 2021 commentary.
