On Wednesday’s episode of Mad Money, Jim Cramer reviewed the recent developments affecting drug distribution companies and laid out why he is turning cautious on the group. He pointed out that stocks of major drug distributors have retreated from their all-time highs.
“Most of the time, that’s because of vague, amorphous concerns that some type of regulatory crackdown will force them out of business or, at the very least, make them a lot less profitable.”
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Cramer referenced the executive order signed by the President last week aimed at lowering drug prices, which triggered a sell-off across the drug distribution sector. He explained that the order would effectively require pharmaceutical companies to offer the U.S. government drug prices that match the lowest rates charged in other advanced economies. Cramer said the market’s fear is straightforward: if drugmakers are forced to cut prices for their government customers, then drug distributors could see their margins shrink.
“The bottom line: No matter how well the drug distributors have been doing, I do not want to stick my neck out for an industry that now seems to be hated by both the Democrats and the Republicans. It seems like the only thing they agree on, doesn’t it? There are so many potential winners in this market, I say, why take the risk?”
Our Methodology
For this article, we compiled a list of 8 stocks that were discussed by Jim Cramer during the episodes of Mad Money aired on May 14. We listed the stocks in the order that Cramer mentioned them. We also provided hedge fund sentiment for each stock as of the fourth quarter of 2024, which was taken from Insider Monkey’s database of over 1,000 hedge funds.
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8 Stocks on Jim Cramer’s Radar Recently
8. Astera Labs, Inc. (NASDAQ:ALAB)
Number of Hedge Fund Holders: 51
A caller asked about Cramer’s opinion of Astera Labs, Inc. (NASDAQ:ALAB) during the recent episode, and he commented:
“Okay, Astera Labs is a company that is incredibly well run, that has tremendous growth, but like many other companies, that stock has come down in value. I actually think it’s a good place to buy, given the fact that so many of these other stocks actually even have higher price-to-earnings multiples.”
Astera Labs (NASDAQ:ALAB) develops and sells semiconductor-based connectivity solutions used in cloud and AI systems, including hardware products and software that support system management, resource optimization, and high-speed data transfer. Artisan Partners stated the following regarding Astera Labs, Inc. (NASDAQ:ALAB) in its Q4 2024 investor letter:
“Among our top Q4 contributors were Astera Labs, Inc. (NASDAQ:ALAB), Veracyte and Vita Coco. Astera Labs is a fabless provider of connectivity chips designed to address data, network and memory bandwidth bottlenecks in data centers. With increasingly powerful graphics processing units and central processing units—costing $5,000 to $40,000 and depreciating within 3–5 years—often operating at only ~50% utilization due to architectural constraints, Astera’s products play a critical role in enhancing efficiency. As compute architectures become more heterogeneous across graphic processing units, central processing units and custom accelerators, Astera’s solutions enable better collaboration between disparate chips. Recent earnings displayed strong momentum of its core products and benefited from adding new offerings to drive scale within the data center market, driving a strong rally in shares. After the strong rally, we trimmed our position based on valuation.”
7. Omega Healthcare Investors, Inc. (NYSE:OHI)
Number of Hedge Fund Holders: 21
Expressing concerns about the safety of its dividend due to potential cuts to Medicaid, a caller inquired about Omega Healthcare Investors, Inc. (NYSE:OHI). In response, Cramer said:
“I think you’re right to be worried. I think you’re right to be worried. Why? Because of exactly what you said. That’s why I’ve always liked Ventas because I think that Deb Cafaro can navigate through anything, but the yield is much lower. I don’t want to reach for yield.”
Omega Healthcare Investors (NYSE:OHI) is a real estate investment trust (REIT) that offers capital and financing to the long-term care sector. It focuses mainly on skilled nursing facilities in the United States and the United Kingdom.
The company recently reported its results for the first quarter of 2025. Omega Healthcare Investors (NYSE:OHI) reported net income of $112 million, $0.33 per share, which was an increase from the same period in 2024, when net income totaled $69 million, or $0.27 per share. Year-to-date, the company completed $423 million in new investments through April.
6. McKesson Corporation (NYSE:MCK)
Number of Hedge Fund Holders: 78
McKesson Corporation (NYSE:MCK) was mentioned during the episode, and here’s what Mad Money’s host had to say:
“These stocks, namely Cardinal Health, Cencora, and McKesson, are seemingly perpetual residents on the new high list. Over the long haul, they’re some of the best performers out there, and they’ve done great this year, as is pretty much always the case. And yet, doesn’t it always feel like the drug distributors are just one bad day away from falling apart… The last quarter from the major drug distributors came from McKesson, and that was last Thursday night, which delivered yet another very strong set of numbers… Like the others. McKesson had a top-line miss, in this case, actually a pretty sizable one, but still delivered a significant earnings beat, and gave a higher-than-expected full-year earnings forecast in a vacuum.
I think the McKesson quarter was strong enough to spark a nice rally for the stock last Friday. But we don’t live in a vacuum, do we?… The big negative development for the drug distributors came midweek when Politico reported that President Trump would be reviving an effort to dramatically cut drug costs by adopting what’s known as the Most-Favored-Nation pricing for Medicare…
As a result, all the drug distributors are either flat or slightly lower this week… so that’s the conundrum with these middlemen, Cardinal, Cencora, and McKesson are all doing incredibly well, but like I said before, there always seems to be a threat that they could be regulated out of existence.”
McKesson (NYSE:MCK) provides healthcare services by distributing medications, medical products, and handling logistics. The company also supplies technology tools, advisory services, and support for healthcare providers, biopharma companies, and patients.
5. Cencora, Inc. (NYSE:COR)
Number of Hedge Fund Holders: 58
Cramer noted that while Cencora, Inc. (NYSE:COR) “knocked it out of the park” with its earnings report, the stock always seems to be in danger.
“These stocks, namely Cardinal Health, Cencora, and McKesson, are seemingly perpetual residents on the new high list. Over the long haul, they’re some of the best performers out there, and they’ve done great this year, as is pretty much always the case. And yet, doesn’t it always feel like the drug distributors are just one bad day away from falling apart… Cencora… knocked it out of the park when they reported last Wednesday… Posted a slight top line miss but monster 31 cent earnings beat off of $4 [and] 11 cent basis.
Even better, just like Cardinal, management raised their full-year earnings forecast substantially. Cencora has raised its 2025 earnings guidance multiple times since originally issuing it in November. That’s what you really want if you’re a growth manager. The stock jumped 4.7% last Wednesday in response to the report, setting an all-time high of $309 and change before settling a little bit below that level…
The big negative development for the drug distributors came midweek when Politico reported that President Trump would be reviving an effort to dramatically cut drug costs by adopting what’s known as the Most-Favored-Nation pricing for Medicare…
As a result, all the drug distributors are either flat or slightly lower this week… so that’s the conundrum with these middlemen, Cardinal, Cencora, and McKesson are all doing incredibly well, but like I said before, there always seems to be a threat that they could be regulated out of existence.”
Cencora (NYSE:COR) distributes pharmaceutical products and provides healthcare services across global markets. The company supports providers through pharmacy operations, clinical trial assistance, and focused logistics solutions.
4. Cardinal Health, Inc. (NYSE:CAH)
Number of Hedge Fund Holders: 63
Cramer recommended buying Cardinal Health, Inc. (NYSE:CAH) because of its “value-added services”.
“These stocks, namely Cardinal Health, Cencora, and McKesson, are seemingly perpetual residents on the new high list. Over the long haul, they’re some of the best performers out there, and they’ve done great this year, as is pretty much always the case. And yet, doesn’t it always feel like the drug distributors are just one bad day away from falling apart… Let’s not forget that the drug distributors are making fortunes right now. Cardinal Health turned in an excellent set of numbers two weeks ago with double-digit earnings growth. Management put through a big boost in their full-year earnings forecast. Cardinal stock jumped 3% in response, climbing from $141 to $145, and it kept running for really a week after that, eventually setting at an all-time high of $154 just last Thursday. What a fabulous move…
The big negative development for the drug distributors came midweek when Politico reported that President Trump would be reviving an effort to dramatically cut drug costs by adopting what’s known as the Most-Favored-Nation pricing for Medicare…
As a result, all the drug distributors are either flat or slightly lower this week… so that’s the conundrum with these middlemen. Cardinal, Cencora, and McKesson are all doing incredibly well, but like I said before, there always seems to be a threat that they could be regulated out of existence…
Now, if you really want to own one, and I do like this one, Cardinal Health is the one to do it with because it provides a lot more value-added services than the others. Now, we’ve had Cardinal on several times, and I think they’re doing some very innovative things. They are impressive, they’re beyond middlemen.”
Cardinal Health (NYSE:CAH) supplies healthcare products and services across different care environments. It offers pharmaceuticals, medical equipment, and support solutions. The company also handles logistics, pharmacy operations, and distribution using technology across the healthcare sector.
3. Super Micro Computer, Inc. (NASDAQ:SMCI)
Number of Hedge Fund Holders: 45
A caller asked if they should take a look at getting rid of Super Micro Computer, Inc. (NASDAQ:SMCI), and Cramer replied:
“No, no. To tell you the truth, I mean, this one had some accounting issues. They do seem to be now long enough behind them that analysts are starting to recommend the stock again. It’s relatively cheap versus the whole cohort. If you want to consider the cohort… like a CoreWeave or, of course, an NVIDIA, and I would tell you, it is more expensive than Dell. I do like Dell more, but I think you could do a lot more… with Super Micro. But let me tell you something, you’ve got more product knowledge than I do, and I like what you had to say.”
Super Micro Computer (NASDAQ:SMCI) designs and produces high-performance server and storage hardware for demanding computing needs.
2. Reddit, Inc. (NYSE:RDDT)
Number of Hedge Fund Holders: 87
Cramer noted that Reddit, Inc. (NYSE:RDDT) is a “buy” but only for investors who can withstand market volatility.
“So many stocks have made incredible comebacks over the past few weeks, but there are still plenty of names that are way down from their highs earlier this year. Take Reddit… while the stock soared 11% today, it’s off more than a hundred bucks from its February peak of $230 and change. I think it might be a buying opportunity here as long as you steel yourself for a potentially wild ride. It is a wild trader. See, two weeks ago, Reddit reported the stunning quarter, but the stock didn’t get any credit for it at all… Despite initially surging 18% in after-hours trading, Reddit stock finished the next session down more than 4%…
While I think Reddit’s absolutely worth buying at these levels, even after today’s monster move, stocks like these are only worth owning if you can stomach some serious volatility like we’re having right now. Keep in mind, we’re always one presidential tweet or whatever you want to call it away from these kinds of names falling out of favor all over again. That’s why I say Reddit’s a buy, but only if you’ve got the intestinal fortitude to stick around for the long haul.”
Reddit (NYSE:RDDT) runs a widely used platform where users share content, take part in discussions, and engage in communities centered on specific topics.
1. Lockheed Martin Corporation (NYSE:LMT)
Number of Hedge Fund Holders: 65
During the episode, a caller asked if they should buy more, sell, or hold Lockheed Martin Corporation (NYSE:LMT). Here’s what Cramer had to say:
“Okay, so Jim Taiclet runs this company, and he’s a terrific, honorable, good guy. It now yields almost 3%. You can say, well, that doesn’t compensate, but it only sells for 16 times earnings. I think Lockheed Martin, you start a position right here. I would have no problem buying a stock that Jim Taiclet is in charge of and that… sells for only 16 times earnings.”
Lockheed Martin Corporation (NYSE:LMT) is a global company focused on security and aerospace. The company creates, builds, and develops high-tech systems, products, and services used in defense and space operations.
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