We recently compiled a list of the Jim Cramer’s Latest Game Plan: 15 Stocks to Watch. In this article, we are going to take a look at where CVS Health Corporation (NYSE:CVS) stands against the other stocks in Jim Cramer’s latest game plan.
Jim Cramer, host of Mad Money, recently weighed in on the factors that will shape market movements this week, pointing to the Federal Reserve’s upcoming meeting and a slew of corporate earnings reports as key developments. However, despite the importance of these earnings, Cramer believes that the presidential election will take center stage and dominate the market’s attention.
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While acknowledging the significance of the election, Cramer emphasized that the Federal Reserve’s next decision is perhaps even more crucial for the markets. He noted that the bond market has been moving in an unfavorable direction, with the situation further complicated by a disappointing non-farm payroll report.
Though this report was skewed by hurricanes and labor strikes, it initially sparked a positive reaction in the bond market, pushing rates lower. Cramer had hoped that this would signal a positive shift, but the optimism was short-lived, as bond sellers quickly drove rates back up to their highest levels since early July.
“In my opinion, the Fed needs to cut rates again. In the last couple weeks, we’ve heard from too many businesses that have made it clear that we have a real slowdown on our hands. Economy’s a little shaky.”
Cramer also reflected on the Fed’s decision to reduce rates in September. He acknowledged that the bond market reacted negatively to the rate cuts at the time despite an economy that appeared relatively strong and a healthy labor market. Cramer discussed the possibility that if the Fed were to cut rates again, the market could see another unfavorable response. However, he remained unconcerned about this potential backlash, arguing that a rate cut could help to generate optimism in certain sectors.
“At this point in my view, if the Fed cuts rates next week, psychologically there’s some hope that we could see a pickup, particularly in housing and autos, two industries that seem to be losing strength by the day.”
Cramer highlighted that both presidential candidates appear willing to expand the federal budget. His main concern, however, was whether either candidate would be able to push their proposed agendas through Congress, a process he described as extremely difficult. Cramer noted that, in his opinion, presidential candidate Trump would likely be a bigger proponent of increasing the budget deficit than presidential candidate Harris, particularly due to the tax cuts Trump favors, which tend to result in larger deficits.
Stating his bottom line, Cramer said:
“… At the end of the day, the market’s still going to be hostage to the election, and perhaps more important, to the Fed meeting.”
Our Methodology
For this article, we compiled a list of 15 stocks that were discussed by Jim Cramer during the episode of Mad Money on November 1. 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 row of shelves in a retail pharmacy, demonstrating the variety of drugs and over-the-counter products.
CVS Health Corporation (NYSE:CVS)
Number of Hedge Fund Holders: 60
Cramer highlighted CVS Health Corporation’s (NYSE:CVS) new CEO and said:
“Wednesday CVS reports and we’ll learn about new CEO David Joyner’s turnaround plans, we hope. He’s got some real heavy lifting to do because CVS has a very jumbled set of assets. I’m rooting for him. Poor guy needs all the help he can get.”
CVS Health (NYSE:CVS) offers a wide range of health solutions in the U.S., including health insurance products and services, pharmacy benefit management, and pharmacy services. It serves diverse customers, such as employer groups, individuals, health plans, and government programs. Additionally, the company sells prescription drugs, and over-the-counter products, and provides consulting services to healthcare facilities.
However, the company has faced multiple challenges these few past years, marked by slow revenue growth and declining stock performance. Since January, the company’s shares have dropped by over 32%. This downturn is partly attributed to rising labor costs, both at the corporate level and in pharmacy operations. The healthcare benefits segment, which includes Aetna, has also struggled due to higher healthcare costs and increased utilization.
According to the company, there was a notable increase in its Medical Benefit Ratio (MBR) in the most recent quarter, and it cited higher Medicare Advantage utilization, lower Star ratings, and greater Medicaid acuity as key factors.
In light of these difficulties, CVS Health (NYSE:CVS) announced a significant leadership change in October 2024, appointing David Joyner as President and Chief Executive Officer. This change coincided with the company’s decision to withdraw its 2024 earnings forecast and disclose that its third-quarter profits would fall well below analysts’ expectations, which led to further declines in its stock price.
As reported by Bloomberg News, in an internal memo to employees, Joyner acknowledged the challenges facing the company and called for financial and operational improvements to ensure the company’s continued leadership in the healthcare industry. According to Reuters, Joyner has highlighted his previous experience at Aetna, where he addressed similar issues, and expressed confidence in his ability to navigate the current difficulties and drive the company forward.
Overall CVS ranks 6th on our list of the stocks in Jim Cramer’s latest game plan. While we acknowledge the potential of CVS 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 CVS 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.