We recently published a list of 10 Stocks To Buy Before They Split Next. In this article, we are going to take a look at where Eli Lilly And Co. (NYSE:LLY) stands against other stocks to buy before they split next.
S&P 500: Targeting 6,000 Amid Market Optimism
There’s been a notable sense of fear among investors despite the market’s current strong performance. The upcoming weeks are expected to be particularly interesting due to the convergence of earnings reports and an impending election, alongside uncertainty regarding the Fed’s next moves. But the fact remains that the market has shown resilience, with numerous new highs for major indices this year, although investors remain skeptical. Historically, volatility tends to increase after elections as political changes take effect. Currently, volatility is relatively low but is anticipated to rise as January approaches and clarity about potential policy impacts emerges.
Despite prevailing uncertainties, there remains cautious optimism about the market’s ability to maintain its upward trajectory. In mid-October, J.J. Kinahan, IG North America CEO, joined CNBC to the skepticism displayed by investors. We covered his sentiment in our article about the 8 Best US Stocks For Foreign Investors Right Now:
“Kinahan pointed out that many investors are hesitant, particularly those in their mid-30s and younger, who have not experienced a significant downturn in the market. He explained that this demographic often perceives any market decline as temporary, lasting only a few days. He emphasized the importance of taking risks when young and noted that many younger investors are excited about their opportunities in the current market environment. This positive sentiment is particularly significant given their parents’ experiences during the financial crisis of 2008-2009.
He also speculated that part of the reason for the market’s strong performance might be attributed to older investors who have been burned in previous downturns and are now waiting for a pullback that has yet to materialize. Kinahan suggested that as these investors gradually capitulate, they may start to invest more actively in the market.”
READ ALSO: 7 Best Stocks to Buy For Long-Term and 8 Cheap Jim Cramer Stocks to Invest In
Around the same time, Mary Ann Bartels, Sanctuary Wealth chief investment strategist, joined ‘Squawk Box’ on CNBC to discuss the market trends as well. On October 14, Mary Ann Bartels highlighted that the S&P 500 could reach 6,000 by year-end. However, she acknowledged that while this target is achievable, the journey may not be smooth.
Bartels noted that there could be volatility ahead, as evidenced by increased hedging activity in the market. However, she remains optimistic due to the Fed’s shift towards an easier monetary policy and the ongoing economic growth, which is supported by full employment, albeit with a slight slowdown in job creation. Importantly, she highlighted that corporate profits are on the rise, with earnings currently beating expectations by about 5%. This positive trend across fundamental and technical indicators leads her to believe that the market can continue its rally into November and December.
As the S&P 500 recently closed above 5,800 for the first time at 5,815, Bartels discussed how this milestone brings the 6,000 target closer. She echoed sentiments from Tom Lee, who suggested that market behavior could improve significantly if there is clarity regarding the outcome of the presidential election. Bartels agreed that once a winner is declared, it could trigger a relief rally as both domestic and foreign investors gain confidence in the stability of US leadership.
Turning to the Fed’s actions, Bartels addressed concerns about recent CPI and PPI data coming in hotter than expected. She described potential short-term volatility as a bucking bull, indicating that while fluctuations might occur, the overall trend remains upward. Her year-ahead thesis suggests both fixed-income and equity markets are poised for positive returns, albeit with some bumps along the way.
Bartels also advocated for buying opportunities in the current market environment. She specifically pointed to technology stocks and the NASDAQ, which has yet to hit a new record high. She believes technology will continue to lead the market, particularly emphasizing semiconductors as key drivers of growth. For investors looking to enter the tech sector, she sees this as an opportune moment.
Her perspective underscores a belief in the resilience of corporate profits and economic fundamentals amid changing monetary policies and external uncertainties. At the same time, it should be noted that the optimistic outlook for the S&P 500 targeting 6,000 is significant for stock splits as it reflects positive market sentiment, encouraging companies to make their shares more accessible to retail investors. When share prices rise, splits can attract more buyers by lowering the price per share. However, it’s important to note that a stock split does not change anything about a business’s fundamentals. A poor company will stay a poor company post-split and a good company will stay a good company.
Our Methodology
We sifted through financial media reports to compile a list of stocks that are likely to split. We then selected the 20 stocks that have experienced the highest gains in their share prices over the past 5 years and have a history of spitting their stock. From that, we picked the top 10 stocks that were the most popular among elite hedge funds and that analysts were bullish on. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, as of Q2 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
An array of pharmaceutical pills with the company’s logo on the bottle.
Eli Lilly And Co. (NYSE:LLY)
Share Price as of October 18: $918.33
Surge in Share Price in 5 Years: 745.30%
Stock Split Confirmed: no
Number of Hedge Fund Holders: 100
Eli Lilly And Co. (NYSE:LLY) is a global pharmaceutical company that develops, manufactures, and markets prescription drugs for various therapeutic areas. It’s known for its innovative research and development efforts, which have led to the creation of important medications for conditions such as diabetes, cancer, and autoimmune diseases. Some of its products include insulin, antidepressants, and treatments for cancer, diabetes, and autoimmune diseases, sold in over 125 countries.
In Q2 2024, revenue soared 35.98% to $11.30 billion, driven by new products generating nearly $3.5 billion. The company is adding 11 new obesity treatments and investing $5.3 billion in Indiana manufacturing.
The company’s strong growth is driven by its weight loss drugs, Mounjaro and Zepbound, which together could generate up to $25 billion in peak sales. While Zepbound contributed $1.2 billion in Q2 revenue, the company is also developing promising next-generation candidates. It’s investing in future growth with orforglipron and retatrutide, projected to generate over $1 billion annually by 2030. The company is also seeking regulatory approval for a once-weekly insulin medication.
The company achieved significant milestones, including Alzheimer’s disease approval for Kisunla, Japan approval for Jaypirca, and positive Phase 3 results for tirzepatide in heart failure and obesity. In July, the company acquired Morphic, a developer of oral therapies for chronic diseases. Additionally, management announced the availability of new Zepbound doses.
Eli Lilly And Co.’s (NYSE:LLY) strong financial performance, innovative drug pipeline, and strategic investments solidify its position as a leading healthcare company. Revenue guidance for 2024 has been increased by $3 billion. Despite increasing competition due to expiring patents, its positioned for continued growth.
PGIM Jennison Health Sciences Fund stated the following regarding Eli Lilly and Company (NYSE:LLY) in its Q2 2024 investor letter:
“Eli Lilly and Company (NYSE:LLY) is a diversified biopharmaceutical company with core franchises in Diabetes, Obesity, Immunology, Neurodegeneration, and Oncology. The company is one of the two global leaders in diabetes with blockbuster products in Trulicity and recently launched Mounjaro (tirzepatide) to serve this large underserved market. To date, the Mounjaro launch is the strongest for any diabetes drug ever launched, which we attribute to off label usage in the obesity indication as well as on label use in diabetes. We believe the tirzepatide (the generic name for Mounjaro) franchise is also uniquely positioned to grow substantially from here thanks to its recent approval for obesity. To that note, in late 2023, Eli Lilly received approval for tirzepatide in obesity and is commercializing it for obesity under a new brand name, Zepbound. While still early in the launch, uptake has been extremely strong, exceeding that of both Wegovy and Mounjaro at the same timepoint in their launches. While Alzheimer’s Disease has been a tough market for drug developers, Eli Lilly has breakthrough designation from the food and drug administration (FDA) for donanemab and recently presented Phase III pivotal trial data that positions donanemab as the most efficacious drug in the class. In June, the FDA advisory committee voted unanimously in favor of donanemab as an effective treatment where the benefits outweigh the risks, praising the therapy as innovative. Donanemab was then approved under the brand name Kisunla in early July. Eli Lilly also has exciting franchises in dermatology, immunology, and oncology that are starting to add meaningfully to growth. With a proven history of strong commercial execution and one of the highest research and development (R&D) success rates in the industry, we see opportunity for continued success. With a lack of meaningful patent expirations for the rest of the decade. Eli Lilly is uniquely positioned amongst its larger-cap peers. Recent positive performance has been driven by the continued strong growth of Mounjaro and Zepbound, which led to a big guidance raise on the 1Q call, an unusual action for Eli Lilly this early in the year, which speaks to their confidence in the strong trends they are seeing.”
Overall, LLY ranks 3rd on our list of stocks to buy before they split next. While we acknowledge the growth potential of LLY, our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than LLY but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
