The Jensen Investment Committee recently completed the sale of Waters Corporation from the Jensen Quality Growth Strategy due to the combination of deteriorating business fundamentals and elevated stock price valuation.
First added to the Strategy in 2007, Waters is a global leader in the development of scientific instruments used for pharmaceutical research and quality control testing. In this business, the company benefits from high customer switching costs and steady recurring revenue generated from consumable and service offerings. We believe this component of the investment thesis remains intact, and, as a result, we retain a favorable long-term business outlook on Waters. However, market share losses in a portion of its business and ongoing leveraging of its balance sheet have increased near-term uncertainty.
We began reducing the stake in Waters’ shares early in 2019 when a sharp stock price advance tripped valuation triggers. Since that time, we steadily lowered the Strategy’s exposure, and the position has remained among portfolio’s smallest over the past year. We will continue to closely monitor Waters and may consider re-adding it to the portfolio should we see improvement in the combination of business fundamentals and stock price valuation.
Fund holdings are subject to change and should not be considered recommendations to buy or sell any security. For a listing of the funds current holdings, please click here.