We recently compiled a list of the Jim Cramer’s Latest Lightning Round: 10 Stocks to Watch. In this article, we are going to take a look at where McKesson Corporation (NYSE:MCK) stands against the other stocks to watch according to Jim Cramer.
The host of Mad Money, Jim Cramer, shared his insights on the persistent issue of inflation. He emphasized that companies need to lower their prices to entice consumers in today’s economic climate. Cramer pointed out the hesitation many companies exhibit in reducing prices.
Cramer said:
“Companies are so reluctant to take prices down because they don’t want to hurt their treasured gross margins but I think it may be time for a giant reset.”
While prices may have stabilized and no longer surged as they once did, Cramer warned that this does not imply they are decreasing. He believes many companies are failing to recognize the necessity for price rollbacks.
He gave a few examples from the liquor industry, where some producers have said that declining sales shifts are because of consumer preferences toward healthier lifestyles rather than acknowledging high prices.
Cramer went on to say:
“Funny enough, if you keep prices low, you can indeed make it up in volume because the consumer is a lot smarter than some of these companies are ever willing to admit.”
Cramer mentioned that both consumers and Wall Street are responding positively to companies that have opted for discounts or price reductions. He talked about the decision by McDonald’s to extend its $5 value meal, which has successfully attracted lower-income customers, and it led to an increase in its stock value.
Cramer mentioned that giants like Amazon, Costco, and Walmart have seen substantial stock gains this year. Cramer believes that businesses willing to reduce prices can compensate for their margins through increased sales volume.
Cramer speculated:
“I think we’ll look back on 2024 as the year when consumers took matters in their own hands and actually said no to inflated prices.”
He warned that companies that fail to adapt may face dire consequences, including leadership changes and plummeting stock prices. Talking about the consequences, he said:
“The result? Fired CEOs and crushed stock prices for all those who refused to heed the thunder, the thunder of those angry consumers who finally just said no to the scourge of inflation.”
Our Methodology
For this article, we compiled a list of 10 stocks that Jim Cramer talked about during the lightning rounds of his Mad Money episodes on October 1 and 2. We listed the stocks in ascending order of their hedge fund sentiment as of the second quarter, which was taken from Insider Monkey’s database of more than 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).
A successful pharmacist in front of shelves of drugs in a community-based oncology pharmacy.
McKesson Corporation (NYSE:MCK)
Number of Hedge Fund Holders: 70
McKesson Corporation (NYSE:MCK) is a Texas-based company that offers healthcare services. It operates through several segments. The U.S. Pharmaceutical segment distributes a wide range of pharmaceutical products and offers support services to community-based oncology practices and pharmacies. The RxTS segment addresses medication challenges by connecting patients, pharmacies, and healthcare providers.
Meanwhile, its Medical-Surgical Solutions segment provides medical-surgical products and logistics to healthcare providers. Lastly, the International segment extends the company’s reach by serving wholesale and retail customers across Europe and Canada.
Cramer mentioned the company and said:
“It’s time to buy it. You know they’re not just a middleman. They do a lot of good things and I think the stock has had way too big a hit. It’s now selling at a below-market multiple. I’m ready to start buying. Don’t buy all at once. Buy in a pyramid style.”
In its fiscal 2025 first quarter, McKesson (NYSE:MCK) reported revenue of $79.28 billion, which fell short of analysts’ expectations of $82.53 billion. However, adjusted EPS reached $7.88, which exceeded forecasts of $7.21.
In terms of shareholder returns, it distributed $609 million, comprising $527 million in share repurchases and $82 million in dividends.
In August, McKesson (NYSE:MCK) announced its intent to acquire a controlling interest in Community Oncology Revitalization Enterprise Ventures, LLC (Core Ventures). It involves a cash purchase of approximately $2.49 billion for a roughly 70% ownership stake.
Once the acquisition is finalized, Core Ventures will be integrated into McKesson’s Oncology platform, with its financial results incorporated into the U.S. Pharmaceutical segment.
Alluvium Asset Management stated the following regarding McKesson Corporation (NYSE:MCK) in its Q2 2024 investor letter:
“McKesson Corporation (NYSE:MCK), the drug distributor, was up 8.9%. We wrote in our March report (after it reported third quarter earnings and returned 16.1%) that we would defer updates until the full year result was released, and that we anticipated an increase to our valuation. And indeed that is what happened, with our estimates of “owner’s earnings” increasing by low double digits and our valuation increasing by 15%. Although it trades at a premium of 13% to that valuation, we are very much aware of our conservatism and feel comfortable in maintaining our 7.1% position.”
Overall MCK ranks 2nd on our list of the stocks to watch according to Jim Cramer. While we acknowledge the potential of MCK 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 MCK 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.