We're trimming a health-care stock ahead of earnings — hedging our bets on business in China

Published Wed, Jan 31 20241:51 PM EST

We're selling 95 shares of GE Healthcare at roughly $74. Following Wednesday's trade, Jim Cramer's Charitable Trust will own 1,150 shares of GEHC, reducing its weighting to 2.75% from 2.97%. The small trim we're making in GE Healthcare with the stock up slightly in an otherwise rough tape does not change our belief in this medical equipment maker as a long-term play. The rollout of Alzheimer's treatments and the integration of artificial intelligence into its products will lead to stronger pricing and higher margins. However, China has us worried right now. Outside of China, the story is strong. At their JPMorgan Healthcare Conference presentation earlier this month, management offered an upbeat view of the hospital capital expenditure environment in 2024 versus 2023. If hospitals have more of a wherewithal to invest in medical equipment, some of that will go to GE Healthcare. However, Philips , a GE Healthcare competitor, reported earnings earlier this week and said its order book fell 3% in the fourth quarter, mostly due to weakness in — you guessed it — China. To be fair, GE Healthcare's outperformance in China, where orders were up year-over-year, was a reason why the stock jumped after its third-quarter earnings report back in October. GEHC 1Y mountain GE Healthcare 1 year Fast forward to the JPMorgan conference, GEHC said it has not seen a meaningful deterioration in its China operations, yet. The company is set to report its quarter next week. Additionally, it has been outperforming its competition on orders for several quarters now. Philips orders have been down for six quarters in a row, but GE Healthcare hasn't seen that weakness yet. So why trim GEHC now? Heading into Tuesday's print, we want to open some room in our position. We want to be ready just in case the stock gets dinged on a cautious guide due to China, or because management wants to start the year with a conservative view that they can beat through throughout the year. Reflecting our small sale, we're moving our rating to a 2 on GEHC. We've battled this name and added to our position several times after the stock broke below $70. With Wednesday's sale, we'll realize a small loss of about 7% on GEHC stock purchased last May. (Jim Cramer's Charitable Trust is long GEHC. 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.