We’re making our first Bullpen update of 2024. The Bullpen is a group of stocks identified by the CNBC Investing Club team as having the potential to affix Jim Cramer’s Charitable Trust. We’re highlighting the 4 most interesting investment opportunities we discovered of the handful of company CEOs Jim interviewed at this week’s JPMorgan Health Care Conference this week in San Francisco. Abbott Labs: Long-time followers of the Charitable Trust, the portfolio we use for the Club, know we had a pleasant run in Abbott Labs from 2017 through early 2022 and exited our position near $120 per share to scale back the portfolio’s exposure on the time to Covid winners. The stock has essentially traded sideways since then, but we expect enough time has passed to take one other have a look at this leader in medical devices and other health-care solutions since it finally could also be past its post-pandemic hangover as testing revenues change into less of a driver of earnings. The stock was working toward this path over the summer but then Novo Nordisk announced the outcomes of a trial that evaluated weight reduction drug Wegovy’s ability to scale back negative cardiovascular outcomes, and in three months Abbott lost about 20% of its value. What the market assumed is that the rise of those GLP-1 drugs (Club name Eli Lilly has two of them in the marketplace ) which help patients manage diabetes higher, shed pounds, and usually change into healthier, would fundamentally disrupt Abbott’s leading diabetes and cardiology units. ABT 5Y mountain Abbott Labs 5 years After the initial slide, the stock began to recuperate because the market began to appreciate that the usage of GLP-1s and Abbott’s FreeStyle Libre continuous glucose monitoring system was not a zero-sum game. Because it seems, the corporate’s studies show GLP-1 adopters are seeing higher results after they use Libre together with the drugs, suggesting the existential risk to its business is overblown. To be fair, we’re still cautious concerning the impact this recent class of medication may have on the food industry (especially salty snacks and confections) but less so on the health-care side. Outside of devices, Abbott has another interesting parts of its business, including Nutrition. The division rightfully received numerous criticism in 2022 on account of a recall of its popular baby formula, but the corporate’s commitment to quality and safety has helped it move past this. It also has a lineup of nutrition shakes for adults, and we expect this product could possibly be a beneficiary of the GLP-1 craze, providing protein to those attempting to limit the muscle loss related to these medicines. Now that the Covid overhang is within the rear-view mirror and the market is beginning to see that those GLP-1s concerns are overblown, investors should start to understand all the expansion and innovation that is happening at Abbott. Within the third quarter, organic sales from its underlying base business (which excludes Covid tests) grew 13.8% 12 months over 12 months and every of Abbott’s 4 major businesses grew at a double-digit clip. Amgen: For many of last 12 months, the main target for Amgen was on overcoming a challenge from the Federal Trade Commission to the biotech company’s nearly $28 billion takeover of Horizon Therapeutics. After the FTC sued to dam the deal last May, Amgen reached a settlement with minimal concessions in September and the deal closed in early October. With that transaction now complete, we will look to Amgen’s future, including the corporate’s four-pillar long-term growth strategy focused on (1) General Medicine, (2) Oncology, (3) Rare Disease, and (4) Inflammation, which Horizon makes a speciality of. Analysts at BMO Capital recently estimated that revenue from Horizon could grow to $6.2 billion by 2030, helping Amgen grow as other parts of its business face pressure. However the primary query investors currently have for nearly every pharma company is what’s their obesity strategy? Everyone seems to be attempting to play catch to Eli Lilly and Novo Nordisk. If we were to position a bet on who the third biggest player might be, it could Amgen. AMGN 5Y mountain Amgen 5 years Given how entrenched Lilly and Novo Nordisk are of their leadership, the one technique to take share could be to develop a differentiated product. Amgen can have something within the works. It is named AMG 133, and what makes it unique is its less frequent dosing schedule. AMG 133 is a once-monthly injection while Lilly’s tirzepatide (Zepbound for obesity and Mounjaro for diabetes) or Novo Nordisk’s semaglutide (Wegovy and Ozempic) are once weekly. It’s highly unlikely that anyone will knock Lilly or Novo off their obesity thrones, but we will make the case that a once-monthly injection would allow Amgen to carve out some share on this $100 billion-plus market. A phase two readout is anticipated sometime within the second half of this 12 months. Amgen can be working on an oral medication and phase 1 data is anticipated sometime in the primary half of this 12 months. Of all of the up-and-comers attempting to break into the obesity market, Amgen will be the best bet. And at roughly 15 times earnings, it’s an affordable technique to play it. Novartis: Over the past decade Novartis has undergone a transition right into a pure-play on revolutionary medicines by spinning out eye health unit Alcon just a few years ago and completing the separation of the Sandoz generics and biosimilars business last fall. Because of this, Novartis has change into a way more focused company. It has prioritized its efforts on 4 core therapeutic areas (1) Cardiovascular-Renal-Metabolic, (2) Immunology, (3) Neuroscience, and (4) Oncology and 4 priority markets — the U.S., China, Germany, and Japan — and only a handful of technology platforms. By doing so, Novartis has created a “recent” company with a way more attractive financial profile. Since undergoing this transformation in 2014, its core margins have expanded from 26% to 36.9% through the primary nine months of 2023. Looking to 2027, management believes it will probably increase core margins to about 40% while continuing to grow sales at a mid-single-digit clip annually. Management expects to deliver on these goals through a combination of sales from its existing brands and execution on its pipeline. Novartis currently has six marketed brands with multibillion sales potential, and five of those are expected to retain exclusivity out to 2030 and beyond. The corporate can be doing good work on its pipeline of latest drugs and expanding indications on its existing lineup. Up to now 12 months, it has delivered 10 positive phase three readouts and presentations. NVS 5Y mountain Novartis 5 years The business can be spewing out a ton of money. Since 2014, Novartis has increased its free money flow from $6.8 billion, or 15.6% of sales, to $11.0 billion, or 32.4% of sales. This has allowed management to reinvest in research and development (R & D), grow its annual dividend, and repurchase shares. From 2018 to 2023, Novartis has bought back greater than $32 billion price of stock — and on a $15 billion program announced in July 2023, it has slightly below $13 billion remaining to be executed. Walgreens Boots Alliance: Of the various firms we heard from on the conference, Walgreens stood out to us as one of the best potential turnaround story. The pharmacy stock was the worst within the Dow Jones Industrial Average last 12 months, and it’s off to a sluggish begin to 2024 after the corporate reported mixed results last week and slashed its dividend by almost 50%, readjusting the yield to roughly 4%. Looking back even further, this has been a stock you’ve desired to avoid for years on account of challenges on the front of the story (the retail part) from Club name Amazon , and headwinds facing pharmacies and PBMs. WBA 5Y mountain Walgreens 5 years After some turnover within the C-suite, Walgreens has finally found a pacesetter who can right this ship. Tim Wentworth became CEO in October, and he’s a highly respected health-care executive who had successful runs because the CEO of Express Scripts and CEO of Evernorth, Cigna ‘s health services subsidiary. He adds credibility to an organization that has sorely lacked it. As JPMorgan analysts identified in late October after they upgraded Walgreens to a buy-equivalent obese, Wentworth never missed 1 / 4 during his time as CEO of Express Scripts between 2016 and 2018. A part of Wentworth’s early focus is on cost savings and money generation. The dividend cut allows them to liberate capital to speculate within the business and pay down debt. He’s also set a goal of generating $1 billion of savings in fiscal 12 months 2024 through rightsizing its cost structure, closing underperforming stores, and reducing capital expenditures. Walgreens also owns a roughly $6 billion stake in drug wholesale company Cencora (previously often called AmerisourceBergen), which it will probably monetize if need be. Turnarounds require numerous work and infrequently they will change into more complicated than what’s initially believed. But when there’s a pacesetter who can pull it off at Walgreens, it’s Wentworth given his industry expertise. A tough lesson over the past few years has been to be skeptical about bullish CEOs at a struggling company, but we at all times prefer to see it after they put their very own money where their mouth is. That is why we took notice of Wentworth’s purchase of 10,000 shares at a median price of $24.222 last Friday price nearly 1 / 4 of 1,000,000 dollars. (See here for a full list of the stocks in Jim Cramer’s Charitable Trust.) As a subscriber to the CNBC Investing Club with Jim Cramer, you’ll 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 a couple of 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.
In an aerial view, a customer enters a Walgreens store on January 04, 2024 in San Pablo, California.
Justin Sullivan | Getty Images
We’re making our first Bullpen update of 2024. The Bullpen is a group of stocks identified by the CNBC Investing Club team as having the potential to affix Jim Cramer’s Charitable Trust. We’re highlighting the 4 most interesting investment opportunities we discovered of the handful of company CEOs Jim interviewed at this week’s JPMorgan Health Care Conference this week in San Francisco.