We recently compiled a list of the 6 Stocks Jim Cramer Talked About This Week. In this article, we are going to take a look at where Eli Lilly and Company (NYSE:LLY) stands against the other stocks Jim Cramer talked about this week.
Jim Cramer, host of Mad Money, recently reflected on how investors often overlook obvious opportunities, particularly with cult stocks, which in hindsight appear to be clear success stories. He discussed how, sometimes, the fundamentals that guide traditional investing can hold investors back from seizing these opportunities.
Cramer acknowledged that many investors, himself included, have missed out on these types of stocks and emphasized that it’s important to examine why these opportunities were missed to avoid making the same mistake again. He mentioned that, early on, he and others mistakenly believed that fundamentals were always the key to making sound investments, only to realize that in certain situations, that’s not the case.
Cramer highlighted that in the case of cult stocks, the stock price can sometimes move independently of the company’s underlying performance. These stocks can experience long-term growth due to a fiercely loyal shareholder base, and as a result, they may not follow traditional market behavior. He explained that while meme stocks might follow similar trends, cult stocks have staying power and can defy expectations.
“There’s a lesson here and it is a brutal one. Sometimes conventional methods of valuation are completely worthless, and you need to embrace the dynamics of cult stocks. The trick is to recognize when we’re in one of those moments. In 2025, let’s strive to find the stocks of companies that do defy orthodoxy.”
READ ALSO Jim Cramer’s Lightning Round: 7 Stocks to Watch and Jim Cramer’s Game Plan for This Week: 8 Stocks in Focus
Shifting the focus to the healthcare sector, Cramer noted that although the market has seen significant gains in recent weeks, it has become increasingly difficult to find promising investment opportunities. However, he believes that healthcare could be the place to look as 2025 approaches. Cramer explained that healthcare stocks have significantly underperformed this year, trailing behind the broader market, which has created an opportunity.
“Now, it’s hard to bet on healthcare when the Fed’s cutting rates because these are textbook slowdown stocks and thrived when the economy was not doing so hot, but the election was also a clear negative catalyst for the group.”
He noted that President-elect Trump’s potential appointment of Robert F. Kennedy Jr. to head the Department of Health and Human Services is a major concern for the industry, especially given Kennedy’s reputation as a vaccine skeptic. Cramer also warned that if the second Trump administration attempts to dismantle Obamacare, it could lead to many Americans losing access to affordable health insurance, which would add further risk to healthcare stocks.
Despite these concerns, Cramer believes that, at some point, all the negative factors will be factored into healthcare stocks, and that moment is fast approaching. He stated that the damage done to healthcare stocks, particularly in biotech and pharmaceuticals, has been severe, but he sees an opportunity as these stocks have become too cheap relative to their long-term potential.
“With so many groups hitting new highs, I think it’s worth taking a step back and putting money to work in one of the most hated groups out there, healthcare. These stocks have simply gotten too cheap given its prospects, especially Eli Lilly, Vertex Pharma, and Bristol-Myers.”
Our Methodology
For this article, we compiled a list of 6 stocks that were discussed by Jim Cramer during the recent episode of Mad Money on December 16. 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
Cramer noted that Eli Lilly and Company (NYSE:LLY) is being careful with its promotion and predicted that the company will be back to its full strength soon enough.
“Eli Lilly is at the top of the list. Now we own this one for the Charitable Trust and it’s earned, it’s nearly [at] $740 billion market cap. But with the stock in the high $700s, it has pulled back almost 20% from its highs in late August. As recently as late October, this stock was still sitting in the low $900s. But Lilly got hit real hard after reporting a seemingly not-so-hot quarter. And then it got hit again after the election, reportedly on an idea that RFK Jr. is not a fan of GLP-1 weight loss drugs like Lilly’s Mounjaro.
Now I think these events are bad reasons to sell the stock. First, while Lily technically reported a miss, it was just technical and it’s technical that it just cut its full-year guidance. The reasons for this were important. The company cited wholesale destocking from Mounjaro and Zepbound for the softer numbers. Many investors took that to mean that the demand for the GLP-1 drugs has to be impaired. But I think Lilly was just being measured with its marketing and promotion at a time when supply was constrained. I don’t think there are any issues with demand whatsoever. These are miracle drugs. If anything, I say Lily’s guilty of poor communication, but that’s created a buying opportunity for anyone who’s missed the stock’s tremendous run. You can get back in.
As for the political risk angle, I got a chance to speak with RFK Jr. on air last week on the floor when President-elect Trump visited the New York Stock Exchange. I asked him directly about these GLP-1 drugs. He said basically that his preference is that people never need these drugs because they eat well and get plenty of exercise. I can’t argue with that. But as David Ricks, CEO of Lilly, has said on this show, diet and exercise, hard to stick to. And there’s plenty of people who need some additional help, which is why these wonder drugs can do.
Kennedy may not like it that we need these GLP-1 drugs, but it certainly doesn’t sound like some major crackdown is coming. I think that is completely false. So in the end, I see things going back to normal for Eli Lilly, assuming they can deliver some better numbers, which I think is a fair assumption. Now, we’ll be back to focusing on the incredible growth of these GLP-1s. By the way, next year we get the fresh phase 3 data for a pill version of Lilly’s GLP-1 treatment, which could be huge if that data’s any good. Basically, you’re getting a chance to buy Lilly at a Black Friday-style discount of nearly 20% year despite its tremendous prospect. What’s not to like?”
Eli Lilly (NYSE:LLY), a leading global pharmaceutical company, is recognized for its extensive range of treatments, particularly in the areas of diabetes and obesity. The company has gained significant attention for its diabetes medication Mounjaro and its companion drug for chronic weight management, Zepbound. These products have rapidly become key drivers of its growth.
Reporting its third quarter, the company stated that U.S. sales of both Mounjaro and Zepbound were impacted negatively due to a reduction in inventories within the wholesaler channel. It should be noted that the sales of both drugs were still strong. Mounjaro alone was responsible for 27.3% of the total revenue, reflecting a remarkable 121% growth compared to the same quarter in the previous year. Zepbound also made a substantial impact, accounting for more than 11% of the revenue in that period.
The company’s CFO, Lucas Montarce, mentioned during the earnings call that wholesalers had reduced inventories of diabetes and obesity medications, describing this as a temporary issue. Looking ahead to 2024, Eli Lilly (NYSE:LLY) revised its earnings forecast, expecting a non-GAAP EPS between $13.02 and $13.52, down from its prior projection of $16.10 to $16.60. This change is largely due to the acquisition of Morphic Holdings.
Lastly, the company is anticipating data from late-stage trials on its experimental obesity pill, orforglipron, with results expected in April 2025, according to a top executive at the company. The pill belongs to a class of medications called incretins, which are designed to replicate the effects of the GLP-1 hormone. This hormone helps control blood sugar levels, slows the rate at which food leaves the stomach, and reduces appetite.
Overall LLY ranks 2nd on our list of the stocks Jim Cramer talked about this week. 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.