The logo of Linde AG on a liquid hydrogen tanker that will accept a fuel delivery at the Linde hydrogen plant in Leuna, Germany, on Tuesday, July 14, 2020.
Rolf Schulten | Bloomberg | Getty Images
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After you receive this email, we will sell 100 shares of Abbott Laboratories (ABT) for approximately $ 141.16. In addition, we will sell 50 shares of Linde (LIN) for approximately $ 343.53.
Following the transactions, the Charitable Trust will own 450 shares in Abbott Laboratories and 325 shares in Linde. This reduction will reduce the weight of ABT in the portfolio from approximately 1.83% to approximately 1.51%, and the reduction will reduce the weight of LIN in the portfolio from approximately 3.04% to 2.66%.
We’re making some adjustments this afternoon to stocks trading at or near their all-time highs. After constantly buying so many different stocks at lower prices as the market has fallen and changed over the past month, from a portfolio management perspective, we think it would be prudent to relax some positions and keep the cash we have at lower levels have used to replenish Comeback and Santa Claus rally.
First and foremost are Abbott Laboratories. ABT has overcome recent volatility in the market and rose more than 10% in December as investors likely resumed their earnings estimates for 2021 and 2022 due to the recent surge in demand for Abbott’s BinaxNOW Covid tests at home. They cannot be found in stores. Even if we quickly learn that the tests will be with us for much longer than we thought six months ago, we are not so sure about the supply. As part of their plan to fight the recent Omicron outbreak, the Biden government pledged to ship 500 million home test kits across the country. What we don’t yet know is where they come from or from which manufacturer. Given the shortage of testing, we worry that the government may need to source testing from companies other than Abbott – and perhaps even overseas – to meet its $ 500 million target. The more tests, the better from a virus-fighting standpoint, but the deluge in test availability could hurt Abbott’s franchise and, by extension, its stock. Because of this, we think it’s prudent to make some big gains after the run the stock has just had.
We will make a profit of around 74% from this trim on the stocks bought in October 2019.
Our second trim will be in Linde. Our decision to post profits this afternoon does not reflect a change in narrative or a call against this industry-leading industrial gas company. Instead, we feel a bit greedy for new highs after the strong run, and it’s not exactly the cheapest name in the portfolio as the stock trades at around 29.5x 2022 earnings estimates. But in the longer term we are fans of Linde and think that it has more leeway because demand comes from all of its end markets. As proof, Linde closed the third quarter with a record order backlog, which will enable earnings per share to grow in the mid-single-digit range over the next four years.
From this trim we will realize a profit of approx. 38% on shares bought in February 2021.
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As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade warning before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling any stock in his charitable trust’s portfolio. After Jim talked about a stock on CNBC TV, he waited 72 hours after issuing the trade warning before executing the trade. Here you can find the investment disclaimer.
(Jim Cramer’s Charitable Trust has long been ABT, LIN.)