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Following the trades, the Charitable Trust will own 450 shares of Abbott Laboratories and 325 shares of Linde. This trim will decrease ABT’s weighting in the portfolio from about 1.83% to about 1.51%, and the trim will decrease LIN’s weighting in the portfolio from about 3.04% to 2.66%.
We are making a couple of trims this afternoon in stocks that are trading at or near their all-time highs. After steadily buying so many different stocks at lower prices as the market fell over the past month and change, we believe it is prudent from a portfolio management perspective to lighten up on a couple of positions and replenish the cash we deployed at lower levels into the comeback and Santa Claus rally.
First up is Abbott Laboratories. ABT powered through the recent volatility in the market and has gained more than 10% in December, as investors likely took up their 2021 and 2022 earnings estimates because of the recent demand surge for Abbott’s at-home BinaxNOW Covid tests. They are impossible to find in stores. Even though we are quickly learning that testing will be with us for much longer than we thought six months ago, one thing we are not so sure of is supply. As part of their plan to combat the recent omicron outbreak, the Biden administration pledged to deliver 500 million at-home test kits across the country. What we still do not know is where will these come from or from which manufacturer. Due to the scarcity of tests, a concern of ours is that the government may need to source tests from companies other than Abbott — and perhaps even overseas — to meet their 500 million goal. The more tests the better from a beating-the-virus perspective, but the flooding of test availability could hurt Abbott’s franchise and, therefore, the stock. For this reason, we believe it is prudent to lock in some big gains after the run the stock just had.
We will realize a gain of about 74% from this trim on stock purchased in October 2019.
Our second trim will be in Linde. Our decision to book profits this afternoon is not reflective of any change in narrative or a call against this best-of-breed industrial gas company. Instead, we are feeling a bit greedy after the strong run to new highs, and it is not exactly the cheapest name in the portfolio, with the stock trading at about 29.5x 2022 earnings estimates. But longer term, we are fans of Linde and think it has more room to run because demand is coming from all of its end markets. As evidence, Linde ended the third quarter with a record backlog, which provides mid-single-digit earnings per share growth visibility over the next four years.
We will realize a gain of about 38% on stock purchased in February 2021 from this trim.
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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. See here for the investing disclaimer.
(Jim Cramer’s Charitable Trust is long ABT, LIN.)