A sign sits outside an Abbvie facility in Cambridge, Massachusetts on May 20, 2021.
Brian Snyder | Reuters
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After receiving this email, we will sell 100 shares of AbbVie (ABBV) at approximately $ 135.78. After the transaction, the Charitable Trust will hold 1,000 shares of AbbVie. This reduction will reduce ABBV’s weighting in the portfolio from approximately 3.53% to approximately 3.22%.
We’re making another little cut on Wednesday in a title that’s been on the 52 week list day in and day out. This transaction is part of our portfolio management plan to remove stocks from several stocks that hit new highs on the return to market so that we can rebuild a cash position that we have actively deployed at lower prices.
AbbVie has been performing very well over the past month, gaining over 16% since early December for several different reasons. Let’s break them down.
At the company level, one of the bearish debates around AbbVie this year has revolved around whether the FDA is going to crack down on the JAK class of inhibitors over safety concerns, even though Rinvoq has stood down. proven to be safe and effective in all of its studies. Any strict labeling by the FDA would impact the Rinvoq franchise, which is one of AbbVie’s most important growth drugs. Rinvoq is so important to AbbVie because it is expected to replace much of the sales the company will miss after Humira loses patent protection in the United States in 2023.
Well, the Bear Thesis on AbbVie took a big step backward earlier this month after the FDA approved Rinvoq for the treatment of adults with active psoriatic arthritis. The news signaled that the FDA may relax Rinvoq and the JAK class as a whole, which, if true, means AbbVie’s earnings per share floor in 2023 is higher than the Bears are predicting.
From an equities perspective, we think investors have gobbled up AbbVie because its large and secure dividend and low price / earnings ratio is what investors like to buy due to fears of a Federal Reserve or a downturn. economic caused by omicron.
And on a sectoral basis, healthcare has been in favor lately because it is defensive and can increase profits even in an economic downturn. Also, drug stocks were seen as a clear winner from blocking the Build Back Better plan because one of its provisions would have enabled the government to negotiate directly with pharmaceutical companies on the price of certain drugs.
So, as you can see, there are a lot of reasons AbbVie has been in tears lately. And despite today’s decline, we believe the stock will rise in 2022, explaining why this position remains one of the most important for the Charitable Trust.
We believe that the stock’s low price-to-earnings ratio has overly taken into account Humira’s loss of exclusivity. Management has done a great job executing the launches of Rinvoq and Skyrizi, supporting the Medical Aesthetics franchise, paying down debt, and we see these themes continuing into the next year. And by the way, the 4.15% dividend is an attractive payout while waiting for the Humira momentum to play out.
But after the recent run, our oldest lot from October 2019 hit a fantastic win of around 82%. We want to lock this down today.
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(Jim Cramer’s charitable trust is long ABBV.)