We're buying more of this health-care company amid an overdone sell-off

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The company has lost billions in market capitalization over the past few trading sessions.

Shortly after the opening bell, we will be buying 140 shares of Abbott Laboratories at roughly $112. Following the trade, Jim Cramer's Charitable Trust will own 700 shares of ABT, increasing our weighting in the portfolio to 2.42% from 1.95%. We are buying more Abbott Laboratories into its recent weakness as we continue to believe the market is overestimating the risk of infant formula litigation.

Whenever headlines like this break, the market tends to shoot first and ask questions later. In this example, the market looked at Abbott's roughly 1,000 pending lawsuits and multiplied it by the $60 million payout to one plaintiff — who was seeking a smaller figure of $25 million — and calculated that Abbott's worst-case scenario exposure could be as much as $60 billion.

There are a few key things to know from this statement. First, there is no scientific data that shows Abbott's formula causes NEC even though the pending lawsuits allege these premature infants developed NEC as a result of the baby formula. Second, premature infants don't have many feeding options for nutrition beyond Abbott's and Reckitt's products. It's the standard of care because there is a lack of alternatives.

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