We recently compiled a list of the 9 Stocks on Jim Cramer’s Radar. In this article, we are going to take a look at where Eli Lilly and Company (NYSE:LLY) stands against the other stocks on Jim Cramer’s radar.
Jim Cramer, host of Mad Money, recently emphasized the importance of long-term investing, urging investors to focus on the growth prospects of certain pharmaceutical stocks while also answering callers’ questions about certain stocks. Cramer acknowledged that stocks often experience cyclical trends, with some sectors falling out of favor temporarily.
“Look, stocks go in and out of style in the Wall Street fashion show. Whole sectors wallow at times. Right now, healthcare’s in some sort of doghouse the likes of which I’ve never seen.”
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Despite the industry’s struggles, Cramer reflected on his observations at the JPMorgan healthcare conference in San Francisco, where he saw many pharmaceutical companies that he believes are not being properly valued by Wall Street. While the present outlook for these companies may not be particularly stellar, he highlighted the strong and lucrative long-term potential they offer.
“Why am I so willing to focus on the so-called out years? Because the long-term possibilities for these companies, frankly, they’re incredible and by the way, incredibly lucrative too, even as the present is good, but not great.”
He pointed to the ongoing progress in the healthcare sector, particularly with GLP-1 drugs, which have the potential to treat more conditions beyond diabetes and weight loss. Additionally, companies are working on developing oral versions of these treatments, which could offer patients more convenient options. Beyond GLP-1 drugs, healthcare companies are expanding their portfolios with new cancer therapies, treatments for eye care and asthma, and experimental drugs for COVID-19.
“The bottom line: Ask yourself what happens if things get better, please. What if the future is brighter than the past? If that’s the case, and I think it is, then you’ll have a lot of winners with these drug and medical device plays.”
Our Methodology
For this article, we compiled a list of 9 stocks that were discussed by Jim Cramer during the recent episode of Mad Money on January 14. We listed the stocks in ascending order of their hedge fund sentiment as of the third quarter, which was taken from Insider Monkey’s database of 900 hedge funds.
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 Company (NYSE:LLY)
Number of Hedge Fund Holders: 106
While talking about a leading global pharmaceutical company, Eli Lilly and Company (NYSE:LLY), Cramer said:
“I want to start with a stock that got pummeled today. Eli Lilly, pulverized. Here’s a company that pre-announced $58 to $61 billion in revenue next year, substantially better than expected on the back of those GLP-1 drugs, approved for diabetes, weight loss, and now obstructive sleep apnea. There’s just one problem here. Lilly’s fourth-quarter estimates, the fourth quarter that we just finished, they aren’t as strong as Wall Street was hoping.”
Cramer noted that the company had a volatile recently, moving from the top of the S&P 500 to the bottom, where it ended up on Tuesday. He pointed out that, despite the company’s large presence, its performance that day was so poor that it lagged behind the other 499 companies in the index. Cramer acknowledged the disappointment but remained somewhat unfazed by the drop, explaining to viewers of his CNBC Investing Club that he sees this as an opportunity.
“See, I’m thinking that Lilly’s wonder drug Mounjaro, also known as Zepbound, has way too many potential indications to write it off because of one subpar quarter. This drug, I believe, will work against hypertension, known as the silent killer, heart failure, complicated liver disease, joints, dementia, and yes, heavy drinking.
It has so many uses that Lilly’s spending $20 billion to build out manufacturing so it can meet the demand even though there’s a very capable competitor, Novo Nordisk, and there are a lot of companies trying to get into space.”
Cramer pointed out that Eli Lilly’s (NYSE:LLY) investment in GLP-1 drugs is crucial, as these medications are not easy to manufacture. He believes the company’s spending in this area will help keep competitors from catching up. However, Cramer also acknowledged that, in the short term, the company has not done an ideal job in launching the drug, and he expressed his disappointment with that aspect of their performance.
“I’m not thrilled about that either. I gotta tell you, however, I can’t think of a better chance to buy the stock on weakness given that Mounjaro has grown faster than any other large drug. So let me ask you, do we want the fastest ramp-up, or do we want the biggest drug of all time? The so-called community of analysts wants the former, I’ll take the latter any day of the week. Oh, did I mention they’ll soon have this weight loss drug in pill form, not just injectable for those who don’t like to give themselves a shot once a week?
Of course, it’s not just the botched launch that’s holding Lilly back. Bobby Kennedy, Jr. (Robert Kennedy Jr.), Trump’s nominee for Health and Human Services is universally known as an anti-vaccine proponent. Now that’s true, but you can also think of him as a believer in diet and exercise. He’s not a huge fan of the GLP-1 drugs, but the food industry has made that diet and exercise regimen almost impossible for most people. So why not let those who can’t diet or exercise enough, take the shot?”
Cramer also pointed out a significant head-and-shoulders pattern in Eli Lilly’s (NYSE:LLY) stock chart, which is often seen as a warning sign. He acknowledged that, in the short term, the outlook for the company may appear bleak. However, Cramer expressed his confidence in the company’s long-term prospects, stating that he remains a firm believer in Eli Lilly’s potential. His advice to investors? “Buy, buy, buy” the stock, indicating his optimism for the future despite the current challenges.
Overall LLY ranks 1st on our list of the stocks on Jim Cramer’s radar. While we acknowledge the potential of LLY as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher 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.
