Here’s an update on the health care and financial holdings in Jim Cramer’s Charitable Trust, the portfolio we use at the CNBC Investing Club. Jim ran through all 35 of the stocks during the Club’s inaugural Annual Meeting on Saturday, an in-person event held in New York City. A video replay of the meeting is available here . Bausch Health (BHC): Shares of the troubled pharmaceutical company have gotten off to a solid start in 2023. However, the fundamental problems that led us to assign Bausch Health our only wait-and-see 4 rating remain a concern. Legal uncertainties around the patent for its key drug, Xifaxan, in addition to BHC’s debt load, continue to be main overhangs on the stock. Those are reasons why it’s off-limits for us until we get more information. At the same time, we’d be remiss not to mention some of the reasons for the stock’s early 2023 rally, including Brent Saunders’ appointment as CEO of Bausch + Lomb (BLCO), the eye-care firm Bausch Health spun out last year. BHC still owns nearly 90% of Bausch + Lomb, with plans to further monetize that stake and use the proceeds to pay down debt. In that sense, good news at BLCO also is good news for BHC. Danaher (DHR): Danaher might be the best-run industrial company in the country. Guided by the Danaher Business System, management has a strong track record of acquiring firms and then improving their margins once they’re under the same corporate roof. We’re bullish on the life sciences and medical diagnostics company’s plans to soon separate its Environmental & Applied Solutions division into its own firm. Danaher has really leaned into the life sciences industry in recent years. At levels below $250 per share, Jim said Danaher is one of the most attractive stocks in the Club’s portfolio. He also said that in response to a member’s question that Danaher, like Apple (AAPL), is a stock that he prefers to own for the long term, rather than trade in and out of it. Humana (HUM): The health insurer has twice raised its 2023 Medicare Advantage enrollment guidance in recent months, a clear sign that management’s market-share strategy is playing out as expected. The company has really enhanced the benefits of its offering over the past year or so. While a few regulatory questions weighed on Humana and other health-insurance names to start 2023, investors have since gotten clarity on those matters. Plus, Wall Street’s rekindled inflation fears in recent weeks have made defensive-oriented stocks such as Humana seem like more attractive places to be. Humana is expected to grow earnings at a solid clip this year, and we think it still is fairly valued. Johnson & Johnson (JNJ): The health-care firm’s upcoming breakup should be beneficial for both entities upon its completion. Its consumer-products unit will become a company known as Kenvue, while its faster-growing pharmaceutical and medical devices divisions will retain the J & J name. This approach should allow the respective management teams to be more focused and more efficiently allocate capital. However, there is some litigation risk with J & J after a federal judge in January rejected its strategy concerning more than 38,000 talc lawsuits. Management is committed to resolving the cases as effectively and swiftly as possible, and Jim said he believes over the long term that will happen. Against that backdrop, we view J & J as a quality defensive name to own, especially given its annual dividend yield of around 3%. Eli Lilly (LLY): The company looks like the most compelling growth story of any large-cap pharmaceutical player. Its type 2 diabetes drug Mounjaro is being studied to treat a host of other medical conditions, including obesity, where trials have shown impressive weight-loss results. We think it’s poised to become one of the best-selling drugs in history, if not the top seller, and the company is investing in expanding manufacturing capacity to meet what’s expected to be fervent demand, assuming it receives regulatory approval for obesity later this year. Lilly also is expected to release the results of its late-stage Alzheimer’s trial in the coming months. Success in that study is not central to our investment case, but the opportunity is sizable. Morgan Stanley (MS): Morgan Stanley’s fourth-quarter results demonstrated the power of the bank’s revenue diversification strategy. CEO James Gorman’s decision to lean into asset management — and the more stable fee-based earnings stream associated with it — is a key element to our investment thesis. Eventually, we think the market will come to fully recognize that Morgan Stanley is not the same old investment bank of the past and assign its stock a premium valuation. We’re not all the way there yet. But in the meantime, Morgan Stanley’s over 3% annual dividend yield and steady stock buyback program will continue to reward patient shareholders. With a competitive and proven leader like Gorman at the helm, Morgan Stanley is a stock to hold. Wells Fargo (WFC): The money-center bank is one of our largest positions in the portfolio, and its stock has recently been helped by the increase in interest rates engineered by the Fed to fight inflation. The reason higher rates enable Wells Fargo to make more money from its massive pile of customer deposits is an industry metric known as net interest income (NII). Big picture, Wells Fargo continues to be an attractive turnaround story as CEO Charlie Scharf works to overcome a series of past scandals under prior management. There are some remaining regulatory hurdles, most prominently a Fed-mandated asset cap that effectively constrains Wells Fargo’s ability to issue new loans. However, we eventually believe that will be lifted, even if the timeline is uncertain. In the meantime, Wells Fargo restarted its share repurchase program in the current quarter, and management’s disciplined expense outlook should help protect earnings. (Jim Cramer’s Charitable Trust is long BHC, DHR, JNJ, LLY, HUM, MS, WFC. 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. 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The logo of Morgan Stanley is seen in New York
Shannon Stapleton | Reuters
Here’s an update on the health care and financial holdings in Jim Cramer’s Charitable Trust, the portfolio we use at the CNBC Investing Club. Jim ran through all 35 of the stocks during the Club’s inaugural Annual Meeting on Saturday, an in-person event held in New York City. A video replay of the meeting is available here.
