Investing Club: We're capitalizing on one of our drug stocks' incredible run, selling some shares

Published Mon, Feb 28 20229:03 AM EST

We're selling 200 shares of Abbvie (ABBV) at roughly $147.65. Following the trade, we'll own 700 shares of ABBV, decreasing its weighting to 2.68% from 3.42%. We are locking in more profits in AbbVie on Monday morning to capitalize on the stock's impressive run of outperformance. Over the past three months, shares have rallied roughly 26% to new all-time highs while the S & P 500 has sputtered lower by 5%. Year to date, ABBV has gained 10% compared to an 8% drop in the S & P 500, based on last Friday's closing prices. When stocks outperform like this, what we tend to see is that analysts who previously championed the stock move to the sidelines on a declining risk-reward. While there may be nothing wrong with the business, a big run in the stock means the price-to-earnings multiple no longer screens as cheap as it once was versus peers and the dividend yield isn't as large as it once was (a result of the increase in equity price). Case in point is UBS: Analysts there downgraded their rating on the stock to neutral from buy, with an updated price target of $147. A full valuation was the main driver of the downgrade, with the analysts writing that "ABBV has successfully executed on a development plan that now has growth relatively assured in the post Humira LOE period. However, based on the stock's current valuation and the near-term pipeline catalysts, we struggle to find further upside to the model that we can gain conviction in." (LOE stands for loss of exclusivity, or in other words coming off patent.) UBS' call Monday is not so different from our recent stance on Abbvie. We recently trimmed our position on Feb. 15 at around $144 per share to take advantage of the incredible run, and we said last Friday in our rapid fire update that we were still more of a seller than a buyer after the run it has had over the past few months. While it's not in our nature to sell into a downgrade and a weak tape like Monday morning, AbbVie shares are still expected to open at a higher price than last Friday's open of $146.13. So we'll make our sale too to capitalize on the stock's recent run, and this influx of cash will allow us to get more opportunistic should prices move lower this week. This ABBV sale will lock in an average gain of about 85% on shares we purchased in late 2019. (Jim Cramer's Charitable Trust is long ABBV. 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.

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We're selling 200 shares of Abbvie (ABBV) at roughly $147.65. Following the trade, we'll own 700 shares of ABBV, decreasing its weighting to 2.68% from 3.42%.