We’re buying the dip in a health and life sciences stock that has gone down enough
We’re buying 20 more shares of Danaher at roughly $180 each. Following Thursday’s trade, Jim Cramer’s Charitable Trust will own 470 shares of DHR, increasing its weighting to about 2.31% from about 2.22%. While Danaher has certainly been one of a handful of problematic stocks in the portfolio, we are stepping into the name here, as we think Thursday’s 3% move lower is overdone. One key investing principle that we have long held, and that has come back to bite us when we didn’t adhere to it, is that giving up on value is a sin. Danaher does have its share of issues, and the health-care sector in general hasn’t been the greatest neighborhood to be in, but there comes a point when those issues are priced in. We think that point is right here, at around $180. Danaher is exposed to health-care markets through its diagnostics business and to biotech through life sciences. Not only are shares trading at the lowest level in five years — with a brief exception being the days immediately after President Donald Trump ‘s “reciprocal” tariff announcement in early April — they are now entering oversold territory. However, based on current estimates, shares of Danaher are also trading at their cheapest valuation since December 2018, on a forward price-to-earnings basis. As a result, we feel we must hold our nose and buy back a portion of shares we sold at higher prices over the summer. DHR 5Y mountain Danaher 5 years In addition to trading at these suppressed levels, we are stepping in because the company earlier this month authorized the repurchase of up to 35 million shares, or just under 5% of shares outstanding. Management is no doubt seeing the same stock price and valuation dynamics as we are, and we expect to find out that they are. too, buying here right alongside us. With this purchase, we are buying back 20 of the 100 shares of Danaher sold in July, and upgrading the stock to our buy-equivalent 1 rating. We’re keeping our price target at $240 per share. (Jim Cramer’s Charitable Trust is long DHR. 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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