We’re trimming two of our holdings that are trading near their highs
Linde AG logo depicted on a truck transporting liquid hydrogen, which was taking fuel deliveries to the Linde hydrogen plant, Leuna, Germany on Tuesday, July 14, 2020.
Rolf Schulten | Bloomberg | Getty Images
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The Charitable Trust will now own 450 shares in Abbott Laboratories, and 325 Linde shares after the trades. ABT will see a decrease in its portfolio weight from 1.83% down to 1.51%. LIN will see a decrease in their portfolio weight from 3.04% to 2.66%.
This afternoon, we are trimming stocks trading near or at their highest levels. We have been steadily purchasing stocks at lower prices over the last month, and we feel it prudent to reduce our portfolio and add cash into the Santa Claus rally and comeback.
Abbott Laboratories comes first. ABT has seen a strong performance despite recent market volatility and gained over 10% in December. Investors likely picked up 2021 and 2022 estimates due to the demand spike for Abbott’s BinaxNOW Covid testing at-home. These tests are not available in retail stores. Although we know that we will have testing for longer than six months, there is one problem: we do not know how much supply. The Biden administration promised to distribute 500 million test kits at home as part of its plan to fight the recent outbreak. We don’t know where these kits will come from, or 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. From a beating the virus perspective, more testing is better, but too many tests could mean that Abbott’s stock and franchise are at risk. We believe that it’s prudent to secure some significant gains following the recent run of the stock.
This trim will result in a 74% increase on October stock purchases.
Linde will host our second trim. This afternoon’s decision to book profits does not reflect any changes in the narrative nor a call against Linde, the best-of-breed oil company. After the recent strong performance, the stock is trading at 29.5x its 2022 earnings forecasts. We feel a little greedy. Long-term, Linde is a favorite of ours and we believe it can continue to grow because of the demand coming from all its markets. Linde finished the third quarter on a record high, which gives the company visibility for the future, with mid-single digit earnings per share growth.
This trim will provide a 38% gain on stocks purchased February 20, 211.
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(Jim Cramer’s Charitable Trust has been ABT, and LIN for a long time.