Jim Cramer is Bearish on These 5 Stocks

2. Illumina Inc. (NASDAQ:ILMN)

Number of Hedge Fund Investors: 40

California-based biotechnology company Illumina Inc. (NASDAQ:ILMN) ranks second in our list of the stocks Jim Cramer is bearish on. Recently, a caller asked Cramer in his program about his thoughts on Illumina Inc. (NASDAQ:ILMN).

The analyst said Illumina Inc. (NASDAQ:ILMN) is a “second rate Danaher” and while there’s no harm investing in second rate companies for now Cramer thinks it’s best to just go for Danaher and said “we are not gonna go by Illumina.”

Cramer said for now we are going to put the “second raters” aside for a moment. Jim Cramer has long been a believer of buying best of breed stocks in different sectors and his thoughts on Illumina Inc. (NASDAQ:ILMN) allude to a similar thesis.

In early January Cramer said that Illumina’s story is uncertaint and “too messy.”

Patient Capital Management stated the following regarding Illumina, Inc. (NASDAQ:ILMN) in its fourth quarter 2023 investor letter:

“We entered Illumina, Inc. (NASDAQ:ILMN), another healthcare name, in the quarter. A previous market darling, Illumina has declined from a high of $524 in 2021 to a low of $92 in 2023. We started adding near the lows. The company is a leader in genomic sequencing but made an ill-advised acquisition of Grail, a blood-based multi-cancer early detection product, in 2021 for $8 billion. The company completed the acquisition before European regulators could complete their antitrust review setting off years of regulatory back and forth. A new management team, new board members, an activist campaign, and an ordered divestiture of Grail later, and we believe we were able to buy a market-leading compounder at the point of maximum pessimism. Despite increased competition in the genome sequencing space, Illumina continues to be a leader with ~80% market share today. With the divestment of Grail, the company will return to a pure-play sequencing company with a drastically improved margin and FCF profile (22% operating margins core ILMN vs 8% with Grail) since Grail has been a cash drag of >$600m annually. Ex-Grail, we believed we were paying a market multiple on 2025 earnings for a market leader with strong cash generation and significant future growth potential.”