4 days Ago
We are buying 25 shares of Danaher at roughly $229 each. Following Monday's trade, Jim Cramer's Charitable Trust will own 550 shares of DHR, increasing its weighting to roughly 3.6% from 3.
4%. The health care sector has been the big loser in the market since the election. If the SPDR Health Care Sector Fund , commonly referred to as the XLV, trades lower Monday it will mark its sixth straight negative session.
The group is facing a big wave of uncertainty after President-elect Donald Trump picked Robert F. Kennedy Jr., a vaccine skeptic and obesity drug critic , to be his secretary of the Department of Health and Human Services.
There is nothing the market hates more than uncertainty, which is why stocks can fall so hard when there is an unclear view of policy. But uncertainty can also create opportunity. We never want to downplay risks — but at a certain level, a stock will price in too many potential changes, reflecting outcomes that may be too severe.
If what happens in real life turns out to be better than what was initially feared, then nibbling on high-quality health care names at these prices could turn out to be bargains. We're not buying big here because the uncertainty overhang could linger for some time, but some of these stocks are getting oversold. That's why we are turning to a couple of health care stocks that have been beaten down over the past couple of weeks.
Since the election, Danaher shares have fallen from $250 each to $230 while Eli Lilly shares have dropped from $806 to $720. DHR YTD mountain Danaher YTD Danaher reported a better-than-expected quarter with a return to growth in its bioprocessing business. Bioprocessing is the use of cell components to make various products including targeted therapies such as vaccines.
Danaher got a lot of business from vaccine makers during Covid. Part of the reason why Danaher has come under pressure after the RFK Jr. pick is concerns about funding to the National Institutes of Health, the country's national medical agency, and part of HHS.
But as Leerink analysts estimated in a research note Monday, less than 1% of Danaher's revenue has exposure to NIH funding. The other side of Danaher's risk is if pharma companies cut back on research and development due to regulatory changes. This will be something to watch in the future, but we think Danaher stock trading at around 27 times 2025 earnings estimates reflect some of this risk.
Separately, we would be buyers of five shares of Eli Lilly at roughly $718 each if we were not restricted from trading. The five shares represent half of what we sold in early September when the stock traded at around $960. LLY YTD mountain Eli Lilly YTD Eli Lilly shares fell from $903 to $846 after a disappointing third-quarter report where inventory destocking of its fast-selling GLP-1 medications caused the company to miss estimates and lower full-year guidance.
We were troubled by Eli Lilly's messaging after the quarter, but felt encouraged in the days that followed that management reiterated to the analyst community that the miss was purely destocking driven and not based on fundamentals or underlying demand . But the possible appointment of RFK Jr. has created a whole host of uncertainty for Eli Lilly and the drug stocks at large.
Last week we pointed out RFK Jr.'s criticism of the obesity drugs, with his two main issues being pricing and his view that dietary and food-systems changes are the better way to tackle high rates of obesity. Sure, pricing may become more of an issue in the future, but there's no debating the science and the medicine's ability to treat obesity and other conditions.
The recent correction in Eli Lilly puts shares trading slightly above 30 times the consensus 2025 adjusted earnings per share estimate on FactSet of $22.52. If you look out to 2026, Lilly shares are trading at roughly 24 times.
While these multiples are a premium to other drug stocks, we think it's cheap considering the company's top-tier growth that will continue as GLP-1 supply capacity catches up to demand. Another thing to keep in mind is that Eli Lilly faces no major patent cliff or IRA pricing exposure through the rest of the decade. (Jim Cramer's Charitable Trust is long DHR, LLY.
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