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Following the trades, the Charitable Trust will own 175 shares of Danaher and 250 shares of Mastercard. This buy will increase DHR's weight in the portfolio from about 0.73% to 1.26%, and the trim will decrease MA's weight in the portfolio from about 2.64% to 2.20%.
Similar to Monday, Tuesday is another weak session for the healthcare sector, and shares of Danaher are down another 2% despite no corporate news. Although the healthcare sector started 2022 on the wrong foot, we see the decline today as nothing more than rotation back into less defensive and more cyclical areas of the market after healthcare outperformed in December.
Today's action is a perfect example of why we always start small when adding a new position. Rarely do we initiate a new stock at a weighting of more than 1% of the entire portfolio because we are humble. We understand that our initial entry point may not always be the best price. It is way too hard of a game to predict the market's movements—let alone the rotation in sectors and individual stocks—on a daily basis. We are not traders. We invest with a long-term time table that usually goes out to 6 to 12 months at a minimum, providing us with plenty of time to gradually scale into a position and average down to an even better price.
This brings us back to Danaher. With today's decline, Danaher shares are now down nearly 7% over the past two sessions (but remember, we bought into the teeth of yesterday's drop) despite no news. This pullback has given us another opportunity to buy more shares of a high-quality earnings compounder that specializes in secular growing markets within the life sciences and diagnostics industry.
For more information about Danaher, please see Monday's article.
Separately, we will be trimming our position in Mastercard and realizing a small gain of about 3% on stock purchased in August 2021. This position has been a battle for the Charitable Trust ever since we re-bought the stock toward the end of the last summer.
Two developments made MA much more volatile than we anticipated. One was the competitive concerns from buy now, pay later leaders (we still think those concerns are overblown). The other was the spread of new COVID-19 variants, which delayed the recovery in cross-border activity, a high-margin business for Mastercard.
We still think Mastercard has room to go higher, and we always appreciate how the company consistently repurchases its stock and increases its annual dividend. However, the volatile nature of this "re-opening trade" stock with a secular growth kicker (cash to card/electronic payments) has us trimming our position and booking a gain into the recent strength.
The CNBC Investing Club is now the official home to my Charitable Trust. It's the place where you can see every move we make for the portfolio and get my market insight before anyone else. The Charitable Trust and my writings are no longer affiliated with Action Alerts Plus in any way.
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. See here for the investing disclaimer.
(Jim Cramer's Charitable Trust is long DHR, MA.)