Danaher shows how holding on to troubled stocks in a good company can pay off

Every weekday, CNBC Investment Club with Jim Cramer publishes Homestretch—an actionable afternoon update just in time for the final hour of trading on Wall Street. (We are no longer recording audio so we can make this new written feature available to members as soon as possible.) Market Talk: The S&P 500 and Nasdaq jumped to new session highs on Wednesday, extending gains from the previous session. A late rebound. In fact, the S&P 500 topped 5,300 for the first time ever. Meanwhile, the Dow is just half a percentage point away from its all-time high. The catalyst in Wednesday’s trading session was a lower-than-expected April consumer price index, which led to higher Treasury bond prices and lower yields (based on their inverse relationship). Affected by this, the market is more likely to see the Federal Reserve cut interest rates multiple times this year. A weak retail sales report for April released on Wednesday was seen as “bad news is good news” as cooling demand for goods could help ease inflation. One thing we want to be wary of during this rally is how overbought the stock market has become. You have to go back to December to find a time when the S&P 500 short-range oscillator was this overbought. To be fair, only a small decline was needed to escape overbought conditions at the time – from December 28 to January 4, 2023, the S&P 500 fell about 2%. This overbought condition. NEW HIGH: We got a chance to check out Danaher’s upbeat presentation at the Bank of America Healthcare Conference on Tuesday. We think management’s talk is consistent with what we heard last month, when all three of the life sciences and medical diagnostics company’s main businesses performed well. We see this as a sign that the long-awaited improvements to the biotech industry are finally coming. At the meeting, Danaher continued to point out that bioprocess inventory destocking will end in the second quarter, driven by the normalization of inventory levels and large customer ordering patterns. The company continues to cautiously forecast lower business activity in China. One point from the meeting we found particularly interesting: If drug prices drop as a result of the Inflation Reduction Act, Danaher may see a tailwind because it’s assumed that volumes of these drugs and patient consumption will increase. Danaher’s business is primarily consumables, which means it is sales-driven. Shares of Danaher rose more than 1% on Wednesday and were up 3% from the previous day. The move pushed the stock to a new 52-week high, but it’s still about $30 below the pandemic record. The stock’s strong performance over the past year is a great example of how staying invested in a high-quality company can pay off when dealing with temporary inventory challenges. In these cases, stock prices may bottom well in advance of the economic cycle. Cramer is quick to accept “Red Lobster suddenly closed about 50 restaurants, which was probably a big deal for people filing for unemployment benefits. That’s a lot of employees,” Jim Cramer said . “Disney shouldn’t be in this decline because it’s becoming a very cheap stock, but people don’t believe Disney is serious about layoffs right now. Peltz doesn’t.” “Data centers are gas consumers. I think they’re going to be built A lot of natural gas power plants to meet electricity demand.” Next up: Cisco Systems reports after the close on Wednesday, and we’ll be interested to hear what the networking equipment company has to say about its acquisition of Splunk. On Thursday morning, we’ll hear from Walmart, Deere, and several Chinese companies like Baidu and JD.com. (See here for a complete list of stocks in the Jim Cramer Charitable Trust.) As a subscriber to Jim Cramer’s CNBC Investing Club, you will receive trade alerts before Jim makes his trades. Jim waits 45 minutes after sending a trade alert before buying or selling stocks in his charitable trust portfolio. If Jim talked about a stock on CNBC TV, he would wait 72 hours after issuing a trade alert before executing the trade. The investment club information above is subject to our Terms and Conditions and Privacy Policy and our Disclaimer. No fiduciary duty or obligation is created or created by any information you receive in connection with the Investment Club. No specific results or profits are guaranteed.

About The Author

admin

See author's posts

About The Author

admin

Leave a Reply Cancel reply

Related News

People Also Read