UBS sends a wake-up call to take profits on an outperforming stock. We're heeding it

Published Wed, Mar 27 20249:13 AM EDT

Shortly after the opening bell, we will be selling 25 shares of Linde at roughly $465.62 each. Following the trade, Jim Cramer's Charitable Trust will own 165 shares of LIN, decreasing its weighting in the portfolio to 2.42% from 2.77%. Shares of Linde are indicated slightly lower Wednesday after UBS downgraded the industrial gas giant to a hold-equivalent rating from buy, while still raising its price target to $510 per share. The stock closed Tuesday's session at $467.55 per share. The UBS downgrade reads like a valuation call and not a concern that earnings estimates are too high and need to come down. The analyst's concern is Linde's best-in-class execution and expanding total addressable market from energy transition projects is already reflected in the stock, which trades at roughly 30 times forward earnings. That's around historic highs for the company. Although the energy transition projects look promising, UBS argued they won't move the needle on earnings for at least a few more years. In addition, UBS sees a lack of near-term catalysts to drive Linde's multiple even higher. Determining the right multiple for a high-quality, earnings compounder like Linde is always a debate. But instead of debating Wednesday whether Linde's current multiple is too high, or if there's room for more expansion, we're viewing the downgrade as simply a wake-up call to take profits if you have not done so in a long time. We have not. Our last Linde trim was on June 16 of last year, at $375 per share. Since then, Linde shares have rallied about 25% compared with a roughly 18% gain in the S & P 500 . Our trim this morning will lock in that outperformance as we realize an average gain of roughly 74% on the shares we purchased in 2021. In addition, we are raising our price target to $500 from $440 to reflect where we may trim next. (Jim Cramer's Charitable Trust is long LIN. 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.