We recently published an article titled Jim Cramer on Super Micro Computer and Other Stocks. In this article, we are going to take a look at where GSK plc (NYSE:GSK) stands against the other super micro computer stocks.
As earnings season kicks off, Mad Money’s host, Jim Cramer reminds investors that bad news can often be factored into a stock’s price ahead of an earnings report. He cited the recent example of PepsiCo, which saw its shares decline before rebounding despite reporting a revenue miss.
Cramer highlighted that when a stock has already faced significant sell-offs leading into a quarter, it is challenging for it to drop further unless the results are exceptionally poor. “This is something you need to keep in mind as we head into earnings season,” he advised, emphasizing the market dynamics at play.
Cramer also expressed his disagreement with the Department of Justice’s exploration of a potential breakup of Google. He argued that such companies play a vital role for consumers, businesses, and the U.S. economy. Acknowledging the power of major tech firms, Cramer pointed out that their substantial customer bases and immense financial resources provide them with advantages that are essential for success.
He went on to say that these companies have become the envy of nations, especially considering that many countries invest heavily in nurturing their own national champions. In contrast, Cramer questioned the approach taken in the U.S., emphasizing the need for capital to foster growth.
“The best companies we have, the best companies in the world, we’re dealing with companies that have done amazing things for the American people, and yet they’re vilified by the Justice Department’s antitrust division, [and] of course, the Federal Trade Commission. Think about it.”
He warned that if the courts side with the DOJ and the FTC, consumers might not benefit as expected. Cramer explained that undermining these companies could open the door for foreign entities, particularly those backed by government subsidies, to fill any gaps left in the market.
“Believe me, if the courts agree with the Justice [Department] and the FTC, let me tell you something. Here’s what’s going to happen. Your prices ain’t coming down, they’re going up. We hurt these companies too much and we don’t have to worry, the PRC will come in with something subsidized by their government that will happily step in the void.”
He challenged the perception that wealth generated by these tech giants is solely hoarded by executives, asserting that investors also stand to gain. He stated:
“You could own the stocks right alongside them. In fact, as I tell CNBC Investing Club members daily, you should…I don’t know what will happen when the Biden administration runs its course, but I gotta tell you, I certainly won’t miss the ruthless prosecution and hectoring of Big Tech…The American government [is] so upset at the power of these companies that it’s insisting the tech titans should simply be less good. To which I say, good for who? Good for what? Certainly not us…Bottom line, I find this endless string of government investigations wrong-headed, pointless, and frankly, even anti-American.”
Our Methodology
For this article, we compiled a list of 10 stocks that were mentioned by Jim Cramer during the lightning round of his episode of Mad Money on October 9. We listed the stocks in ascending order of their hedge fund sentiment as of the second quarter, which was taken from Insider Monkey’s database of more than 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).
A doctor and a patient discussing a therapy plan that includes pharmaceutical products.
GSK plc (NYSE:GSK)
Number of Hedge Fund Holders: 36
Cramer talked about GSK plc (NYSE:GSK) when a caller mentioned the company’s settlement over its drug, Zantac. He said:
“Yeah, that was huge. I’ve been waiting for that. I was hoping for that. They got the settlements behind them. Now we’re moving on. GSK goes higher.”
The company is a big name in the pharmaceuticals sector and specializes in the research, development, and production of vaccines and both specialty and general medicines aimed at preventing and treating various diseases. One of its products, Zantac, gained widespread recognition after receiving US approval in 1983. Within a relatively short period, Zantac became the top-selling drug globally, achieving annual sales exceeding $1 billion.
However, Zantac’s legacy has taken a complicated turn. In 2020, US regulatory authorities made the decision to withdraw Zantac from the market due to concerns that its active ingredient, ranitidine, could convert into a potentially cancer-causing substance when subjected to heat. The regulatory action triggered a wave of legal challenges against the manufacturer of the drug, leading to tens of thousands of lawsuits.
In response to the growing number of claims, on October 9, GSK plc (NYSE:GSK) announced plans to allocate up to $2.2 billion (£1.68 billion) to settle a significant number of these lawsuits in the US, which include allegations that the discontinued formulation of Zantac was linked to cancer. The company disclosed that it has reached agreements with ten law firms representing approximately 80,000 claimants, covering 93% of the outstanding cases.
In addition to the settlements related to Zantac, GSK plc (NYSE:GSK) will pay $70 million to resolve a whistleblower complaint from a laboratory that accused the company of defrauding the US government by not fully disclosing the potential cancer risks associated with the drug. Despite the settlements and the legal battles, the company has maintained that it does not admit any wrongdoing in these matters.
Overall GSK ranks 7th on Jim Cramer’s list of super micro computer and other stocks to buy. While we acknowledge the potential of GSK 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 GSK but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
Read Next: $30 Trillion Opportunity: 15 Best Humanoid Robot Stocks to Buy According to Morgan Stanley and Jim Cramer Says NVIDIA ‘Has Become A Wasteland’.
Disclosure: None. This article is originally published at Insider Monkey.