I’m selling Danaher (DHR) and RTX (RTX) out of my Jubak Picks and Dividend portfolios, respectively, in an attempt to get ahead of some of the likely fallout from policy moves by the Trump Administration. And in order to sit out as much of current market volatility as is possible.
Danaher has been a Jubak Picks Portfolio favorite since June 20, 2017. Through the close on March 18, the position is up 148%. But one of the reasons to own the stock–the company’s successful effort to turn itself into a dominant player as a provider of services–including water purification–for the biotech sector in particular and the larger pharmaceutical industry–has become a liability in the short term at least in a period of huge cuts to government healthcare labs and to government funding for university research.
For example, Johns Hopkins University said Thursday it had begun laying off more than 2,000 workers across the globe after the institution lost $800 million in federal grants cut by the Trump administration. In all, the university cut 1,975 positions in 44 countries and 247 in the United States from the public health nonprofit Jhpiego, the School of Public Health’s Center for Communication Programs and the School of Medicine. Johns Hopkins has led the nation in federal research and development funding every year since 1979, according to the university website. With about 30,000 students, Hopkins is also the largest recipient of National Institutes of Health funding, money that is also at risk after the Trump administration has tried to lower caps of indirect costs for those grants. The NIH cuts have so far been blocked by the courts after a lawsuit from Johns Hopkins and other schools, but if they go into effect, the school could lose more than $200 million per year.
Think cuts to lab research at Hopkins and other universities and at other research labs might have affect on spending and growth in key business sectors for Danaher? The percentage of Danaher’s revenue that is from biotech and pharmaceutical testing and purification, concentrated in the Biotechnology and Life Sciences segments, is approximately 58.75%.
I expect that the company’s April 22 quarterly earnings report will come with management cautions about a potential slowdown in revenue in these business units and the difficulty in projecting growth trends for the rest of 2025. Not exactly what investors want to hear in the short term from a company still trying to “normalize” growth trends after a Covid-19 surge in revenue. The consensus among Wall Street analysts is that the company will report earnings of $1.62 for the quarter, a significant drop from $1.92 a share in earnings in the year ago quarter.
The stock is down 8.85% in the last three months as of the close on March 17. Morningstar calculates that the shares trade at a 21% discount to fair value. I’d note that stocks can trade below fair value for quite a while. And that discounts to fair value can widen. I would look to re-buy Danaher after the threats to healthcare research are priced into the stock and after the volatility produced by Trump Administration policy uncertainty has diminished.
My second sell is RTX (RTX) a defense and aerospace stock I bought for its dividend. I’ve held the shares in my Dividend Portfolio since April 10, 2024. The position is up 31% since that date as of the close on March 17. Thanks to the appreciation, the stock now yield just 1.92%. The last dividend was paid on February 21 so you don’t lose a dividend payment by selling now. Morningstar calculates that the shares trade at fair value. The shares are up 14.7% for 2025 as of the close on March 17.
RTX is an aerospace and defense manufacturer formed from the merger of United Technologies and Raytheon, with roughly equal exposure as a supplier to commercial aerospace and to the defense market across three segments: Collins Aerospace, a diversified aerospace supplier; Pratt & Whitney, a commercial and military aircraft engine manufacturer; and Raytheon, a defense prime contractor providing a mix of missiles, missile defense systems, sensors, hardware, and communications technology to the military.
Two potential trends that are likely, in my opinion, to emerge from Trump Administration policies contribute to my decision sell the shares.
First, the slowing of the global and U.S. economies look to have a negative effect on airline revenue. Airlines cut their capital spending when revenue grow slows or revenue actually falls. At the moment this seems to be an issue concentrated in the U.S. domestic air travel market. Pratt & Whitney’s recent wins on the Airbus A320 family and A220 aircraft insulates RTX to some extent since Airbus sales have a huge non-U.S. component. (And because the big value in the Airbus win is from long-term service contracts.) But it’s hard for me to see that forecasts of a decline in travel from international markets to the United States is a plus for revenue at non-U.S. carriers.
Second, while jawboning from President Donald Trump and threats to pull the United States out of NATO look to be leading to big increases in defense spending by traditional U.S. allies, anger at the policies and the “negotiating approach” of the Trump Administration look to be producing a backlash against U.S. defense contractors. For example, Canada is rethinking its purchase of F-35 fighter jets. Canada has committed to purchasing 88 F-35s from Lockheed Martin, but it is now reviewing whether this contract remains in the best interests of Canada. The country is legally obligated to procure the first 16 aircraft but is exploring alternative options, such as Sweden’s Saab Gripen. I think RTX’s focus on military segments such as missiles and missile defense systems provides some shelter from this backlash, but I’m not convinced that the anger at U.S. policy won’t spill over into these areas. With the yield down to 1.92% I don’t see the argument for keeping the stock in my Dividend Portfolio.
