During the December Monthly Meeting , we took questions directly from Investing Club members. Here are Jim Cramer’s and Director of Portfolio Analysis Jeff Marks’ responses. Their answers have been edited for clarity. 1. What price would you recommend buying Eli Lilly ? (Mary) Jim Cramer: I can see people wanting to buy some at a better price in January when I expect a lot of profit taking. I do know that soon they’ll have a lot of their factories open and they’ll crush competitor Novo Nordisk ‘s Wegovy with their newly approved weight-loss drug Zepbound. Remember, Lilly also lowered the price of insulin. That was the principal source of income for Novo. I work a lot with the FDA (Food and Drug Administration) and I know that the government doesn’t like to “OK” lots of companies that come in because they already have a couple that already work and it makes no sense to add others. Jeff Marks: I think somewhere in the mid to low $500s, but keep in mind that the stock has had a terrific couple of years when many other pharma names have done nothing, or worse, took significant haircuts to their valuation. But what’s clear is the company’s leadership in “diabesity” — diabetes (Mounjaro) and obesity (Zepbound). There will be many who try to encroach on Lilly’s territory, but they won’t find success either due to safety reasons or inferior efficacy. Plus, Lilly has an Alzheimer’s drug that should be approved in Q1 2024, and they’ve made several acquisitions to beef up areas they don’t have leadership in, like oncology. Billionaire investor, Ken Langone recently said on CNBC he thinks Lilly could have a trillion-dollar valuation. A lot will have to go right for that to happen — but if there’s one that can do it, it’s Lilly. 2. What are the best companies now to listen to earnings calls to get an overview of the market? In your book, you mentioned Home Depot , JPMorgan Chase , and Caterpillar , etc. (Milton) Jim Cramer: Caterpillar is the best and if you listened to the conference call you would know why. It’s not levered to China, its levered to data centers. FedEx is another – they tell you everything. Also, Johnson & Johnson because it gives you an overview of the entire industry. Chevron , CEO Mike Wirth likes to tell you about the whole industry. SLB (formerly Schlumberger) likes to tell you about the whole world and oil. And PepsiCo has a real good hand but that one is done by Hugh Johnston who will no longer be there. He’s going to Disney to be the CFO. Jeff Marks: Nvidia for artificial intelligence. You can learn so much from CEO Jensen Huang when he speaks. But you may have to read it multiple times because it can get technical. Another is Amazon because it gives you good updates on what’s happening with the consumer and technology. 3. With Cigna walking away from Humana , is this a good entry spot to buy Humana? (Russ) Jim Cramer: I think Humana stock is trying to tell us that it’s an election year and it’s so easy to beat up these guys. GE Healthcare has been making a nice move. They’re not a health-care company. They’re a hardware company that generates data. And I don’t think anyone thinks there are enough MRIs since every time you want to take one it’s a huge build-up that the insurance company has to pay for even though they don’t want to and they run them around the clock because they can’t get enough of them. Jeff Marks: Humana is one that I’ve struggled on lately. When Cigna walked away, it was able to recover all its losses from the story thanks in part to a huge share repurchase program. We’ve heard nothing from Humana, and that worries me and is why the stock has drifted lower. People are concerned about MLR – medical loss ratio – which has been uneven due to increases in utilization – more people getting procedures done. Hospital volumes have been strong in the last couple of months. Also, others are trying to take market share in Medical Advantage membership, even as Humana has been the leader recently. It’s not expensive and there’s a good track record here of earnings growth, but sometimes the stock is trying to tell you something and that’s why we haven’t wanted to buy any down here. The stock is trading around 15 times earnings – historically it’s closer to 18 to 19 times. 4. Hi, I’ve been buying Coterra Energy on the way down, and it keeps dropping. Where is the bottom, and when will it turn positive again? (Tom) Jim Cramer: Right here. $25. Wish we could buy more. Jeff Marks: Not sure where the bottom is but I like the buy we had Dec. 6 under $25 per share. Energy stocks had just gotten crushed. When West Texas Intermediate crude broke below $70 per barrel, people were thinking it would go to $60 next. It was a contrarian call. And that was before three analysts upgraded the stock to buy last week. Energy is hated but I don’t mind owning one or two of these in small positions just in case the economy reignites faster than the market expects and inflation creeps in again. CTRA will be a good hedge against that. 5. When should I take profits in Costco ? I hate the idea of selling this stock because it is a winner, but don’t to lose profits either. (Christine) Jim Cramer: I had to pull teeth out of CEO Craig Jelinek to admit that they needed a huge number of new stores. They’re humble. COST stock runs up ahead of the special dividend, which the company finally announced. Jeff Marks: This is a dilemma we often face, Jim talked about it Friday on “Mad Money,” and his answer was when you find a stock like Costco, “sometimes you just have to hold onto it for dear life.” It is one of the few companies that can do well no matter what’s happening in the economy – boom times, recession, even a pandemic. The stock is in a sweet spot right now, rallying in anticipation of the $15 special cash dividend ex-date on Dec. 27. It will be payable on Jan. 12. 6. There always seems to be a negative report of Wells Fargo doing something either illegal or unethical. Most recently a discrimination problem with loan discounts. How long do you give a turnaround story to turn around before moving on? (Michael) Jim Cramer: This stuff is legacy. CEO Charlie Scharf inherited 13 consent orders the company did not tell him about. Had he known I don’t know if he would have taken the job. Charlie is an operator. He never thought this would happen. I think that he was fooled because I think they wanted someone good. Charlie thinks the stock is going to $80 and who am I to disagree? It’s around $50 per share currently. Jeff Marks: I think what’s worth remembering is that a lot of the maleficence that occurred here was prior to Scharf coming in and refreshing the leadership and changing the culture. It’s taking more time than what I think anyone thought at first, but it shows you how poorly run it was. That’s also an opportunity because there’s so much room for improvement. 7. What will get Disney out of the doghouse? Or is it time to deploy the cash elsewhere and take the loss for taxes? (Dale) Jim Cramer: I think activist investor Nelson Peltz who is fighting to get himself and ex-Disney CFO Jay Rasulo on the board would help. My daughter sent me an interesting piece from The New York Times about how Disney has lost its culture. Someone has to bring back the culture and it’s not CEO Bob Iger. But it can be done. Jeff Marks: Iger has to check off every box on his game plan. They have to generate at least $8 billion in free cash flow in fiscal year 2024, which would be up from about $5 billion in fiscal year 2023. Prove to the market it can execute on its cost synergy plan. Make direct-to-consumer profitable by the September quarter next year. Restore confidence in its ability to produce box office hits – Disney used to dominate the box office but it’s struggled the past few years. Find ways to unlock the value of linear and limit its exposure through partnerships. It will be a grind, but if all goes according to plan it should be a steady grind. 8. I really enjoyed your interview with Andy Jassy, the CEO of Amazon . I liked the story he told and feel Amazon will only go up in price when the things he spoke about come to fruition. That being said, what would be a good price to buy Amazon? (Kenneth) Jim Cramer: The press hates Amazon, the government hates Amazon, the Justice Department, FTC hates it. Of course, it’s the greatest thing we’ve ever had as consumers. That never stopped the government. What I would do is wait for it to come down. It will be someday when the FTC says that Amazon should be broken up. Jeff Marks: This is the type of stock where you want to buy some if you don’t own it and then leave room to buy more if it pulls back in price. 9. Broadcom has had a terrific run after the closing of VMware. Is now the time to take some off the table or just let it run? (Jonathan) Jim Cramer: We know that when you have a parabolic move, you’re being greedy if you haven’t taken any off the table. No one seems to care about that. All the disciplines that I was brought up with have been thrown out the window because the machines keep buying. People don’t care about price. I care about price. Jeff Marks: We took some off Monday – a small sell of five shares of what was an 80 share position. It’s what we had to do after the stock rallied 20% last week. That’s not a normal move for a company of its size. It’s now one of the largest companies in the S & P 500 with a more than $500 billion market cap. We still like it long-term because of VMware and how it enables private and hybrid cloud environments for enterprises, allowing them to deploy an “apps anywhere” strategy. VMware has an important AI partnership with Nvidia – it virtualizes Nvidia’s GPUs, allowing them to run cooler. It doesn’t create value, but AVGO should split its stock, which trades around $1,120 per share. 10. Wynn is one of the Trust’s smallest positions, is partially tied to the Chinese consumer, and has only drifted lower since the beginning of May. At what point would you consider selling the Trust position to focus more on the other holdings? (Nancy) Jim Cramer: Here is my problem with selling to right now. It’s the one position that if China gets its act together, we could very quickly pick up 20 points. And to sell it now and then the next day China gets its act together, would be just a shame. I don’t want to do that. It’s a great operator and they have two in Macao. One is too high-end. They’re changing that to one that’s lower-end. Of course, they have great property in the U.S. I say we stick with it. Jeff Marks: I think back to $100 we would probably let some go, or at least what we bought at $82 when it fell after earnings. The stock trades at a very low multiple relative to its history. It’s trading at about 10 times enterprise value/EBITDA (earnings before interest, taxes, depreciation, and amortization) versus 12.5 times in 2019. The multiples are so cheap right now because everyone is worried about China and the recovery in Macao. (Jim Cramer’s Charitable Trust is long LLY, CAT, NVDA, HUM, GEHC, CTRA, COST, WFC, DIS, AMZN, AVGO, WYNN. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
Stock buying and selling strategies into year end
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