We’re exiting our position in AbbVie (ABBV), selling 300 shares at roughly $148.14 each. We’re also buying 75 shares of Starbucks (SBUX) at roughly $85.93 each. Following Friday’s trades, Jim’s Charitable Trust will no longer own a position in AbbVie and will own 750 shares of Starbucks, increasing its weighting in the portfolio to 2.28% from 2.06%. Starting with AbbVie , the company reported third-quarter earnings Friday morning and it followed an unfortunate recent trend we have seen for a few quarters in a row now: a revenue miss with an earnings beat. It’s nice to see AbbVie exceed expectations on the bottom line and show off its operating leverage. However, this string of revenue misses — and in this quarter nearly every key product except immunology drug Skyrizi missed their numbers — is increasing the stakes around the growth outlook. This is especially true after its blockbuster rheumatoid arthritis drug Humira loses its patent protection in the United States next year. Humira coming off patent is a well-understood event by the market, but what is still a big question mark is how deep will AbbVie’s earnings trough be in 2023 and how quickly will the company will return to growth thereafter. Due to some of the recent underperformance of some of AbbVie’s key growth drugs, we have become more concerned that the trough will be deeper and it could take longer to get out of it. Therefore, we believe it is best to cash in on our gains and move on from the position. We’ll have more details about the quarter later in the afternoon. We continue to like health care as a defensive area of the market and AbbVie’s big dividend payment, which was increased by 5% in the release, makes the stock tough to part with into Friday’s decline. But this name has been such a great win for the portfolio this year with shares up roughly 9% to date against a 19% decline in the S & P 500 . Also, the stock is still up about $13-per-share, or roughly 9%, since we upgraded our rating to a 1 in late September . That’s a little more than the broader market. On top of the gain, we are awaiting receipt of a $1.41-per-share dividend payment that went ex-dividend on Oct. 13 and will be paid on Nov. 15. This sale will lock in an average gain of about 61% on stock purchased in October 2020 and September 2021. We also want to note that this sale follows our desire to raise cash in what has become an overbought market, according to the S & P Oscillator . Following Thursday’s session, the oscillator reading was positive 5.3%, which is above the positive 4% threshold that signals overbought conditions and the potential for a pullback. Of course, the Oscillator could become more overbought from here, and certain stocks can always move higher in this great rotation into profitable companies that make stuff and do things, our mantra for the Club since the beginning of the year. But at a minimum, we think an overbought Oscillator serves as a reminder that the broader market has had a great run in a very short period and could be due for a pause. Given the overbought nature of the market, we’re only putting a small portion of these AbbVie proceeds back to work, and we’re choosing to bulk up on Starbucks shares. At the time of our Morning Meeting when we discussed our intent to purchase, shares were trading back around our average cost basis thanks to a pullback this week that was driven by concerns about the coffee retailer’s exposure to China. The uncertainty around China’s economic plans and stubbornness around Covid restrictions are near-term risks to the company’s aggressive expansion plans. But as we said Monday , we thought the pullback represented an opportunity. With our restrictions on the stock cleared Friday, we are adding to our position. (Jim Cramer’s Charitable Trust is long ABBV and SBUX. See here for a full list of the stocks.) 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. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
Source: Business - cnbc.com
