Becton Dickinson & Co

Becton, Dickinson and Company (BDX) is a special situation investment that we initiated in July 2025. Following the completion of its Reverse Morris Trust transaction with Waters Corporation, BD received $4 billion in cash, which it used to repurchase $2 billion of stock and repay $2 billion of debt. BDX expects low single-digit currency-neutral revenue growth and adjusted diluted EPS between $12.52 and $12.72 for the fiscal year. With an 8.0% earnings yield at its closing price of $157.23, BD is positioned for mid-single-digit organic revenue growth and margin expansion, leading to a total prospective annualized return in the mid-to-high teens, indicating it is undervalued.

During the past quarter, our two largest purchases were additions to existing positions, including Becton Dickinson, a US-based medical technology company. We perceive Becton Dickinson to be an undervalued opportunity, consistent with our strategy of recycling proceeds into what we believe are undervalued opportunities in healthcare. Our activity reflects a focus on finding compelling investments in sectors where valuations are more reasonable than they were a year ago.

During the past quarter our two largest purchases were additions to existing positions - Azelis, a small-cap, European-based specialty chemical distributor, and Becton Dickinson, a US-based medical technology company. This indicates our confidence in Becton Dickinson's potential for growth and value creation in the medical technology sector.

During the quarter, we added to our position in Becton, Dickinson and Company common stock (NYSE: BDX). BDX gained 3.7% and made a notable positive contribution during the quarter. The company continues to perform well, and we believe it is a strong investment in the health care sector, reflecting our confidence in its growth potential.

Becton, Dickinson (BDX) is a global medical technology company with a strong position in essential medical supplies and devices. Despite facing short-term headwinds, including post-Covid inventory destocking and a slowdown in demand from China, we believe there are no long-term impairments to BDX's business model. The company is expected to return to consistent mid-single-digit top-line growth, supported by new product launches and a strategic separation of its lower-performing Biosciences and Diagnostic Solutions businesses. This shift will enhance its business mix and allow for de-leveraging and share repurchases, ultimately leading to operating margin expansion.

Becton Dickinson stock suffered a 24% decline in the quarter as organic revenue growth of +1% undershot expectations for +3% revenue growth. However, we think the stock price overreacted, and we used share price weakness to add to the position. The crux of the negative sentiment on Becton is that it may be a business that grows between 3-5% rather than one that grows between 5-6%. We’d note that the company grew its base (ex-COVID-19 testing revenue) revenue organically by 7% from fiscal 2021 to 2024. We feel confident that in either case the stock is worth more than its current valuation of less than 12x forward earnings.