We recently compiled a list of the Jim Cramer’s Bold Predictions About These 10 Healthcare Stocks. In this article, we are going to take a look at where Eli Lilly and Company (NYSE:LLY) stands against the other healthcare stocks Jim Cramer has made bold predictions about.
Healthcare has been one of Jim Cramer’s favorite topics lately. The tail end of the year has pushed a portion of the sector, namely healthcare benefit managers and pharmaceutical chains, into Wall Street’s spotlight. Investors were particularly anxious after President-elect Trump’s remarks during a press conference at Mar-e-Lago. At the event, he promised to take on the healthcare middleman due to the high costs that Americans were facing. Americans are “paying far too much. . . .much more than other countries” for healthcare, shared Trump. He pointed at what he believes is the heart of the problem. According to Trump, “We have a thing called the middle man, you know, the middle man right? The horrible middleman that makes more money frankly than the drug companies. And they don’t do anything except they’re a middleman.”
The role played by the healthcare middlemen has also made the President-elect vow to “knock out the middle man” despite understanding that he’s “going to be very unpopular after that.” Cramer has spent several shows discussing either the broader impact of the President-elect’s goal on the benefits management industry or the impact on specific companies. After Trump shared his plans for the middlemen, Cramer pointed out that the industry does enjoy significant reach.
He shared “I think that what, if President-elect Trump follows up about knocking out the middleman, he will. He will because these companies will eventually lose their support in Congress.” This is because Cramer believes that once the different levers of the US government (Republicans, Democrats, and the Executive) act in unison then, “when you have that kind of come together over them, you don’t wanna be in that business.”
However, he cautioned that the big companies are not completely vulnerable. “These companies are not, uh, without their friends,” shared Cramer. He also added that the firms also “resent the middlemen. Cardinal’s had a lot to be able to be a little bit more forward about what can be done. [MCK] is considered to be a company that has done a lot to be able to make it so smaller drug stores get product.”
Yet, while the companies might have friends, some of them are vulnerable as well. Later during his show, Cramer commented on the firm that ranks 13th on this list. He shared that this firm is “viewed as being part of the problem of the cost of healthcare,” and added that “they have no friends.” He also mentioned another firm in a later program. This stock ranks 6th on our list of stocks Cramer talked about after the Fed’s interest rate cut.
He believes that “Look I think that if I were the people at [the healthcare benefit managers], when the President-elect decides that he is going to take a shot at you, as we know from his first time around, it’s not one off. There’s multiple shots. Multiple attempts to say listen you guys are . . . friction. I would not buy these stocks.” Commenting on President-elect Trump and his partner Elon Musk, Cramer commented “I mean these guys are powerful one-two combination.”
The rather sharp remarks for the pharma benefits manager were somewhat of a departure from Cramer’s earlier comments. For the same stock, he shared “Can we just say that the middlemen have been under fire for decades. And they are always, they always, McKesson is always standing. McKesson has just defied everyone. Right. They defy everybody. No one can touch McKesson.”
Overall though Cramer believes that the healthcare benefits management sector might be in for trouble in the future. Investors also appear to be cognizant of this reality with some stocks down 45.57% year-to-date. Within this turmoil, let’s see how his previous stock predictions have fared.
Our Methodology
To compile our list of Jim Cramer’s bold predictions about healthcare stocks, we scanned the stocks he mentioned in Mad Money and Squawk on the Street as far back as in August. Then, we picked out pharma, hospital management, and healthcare benefit management stocks and ranked them by the number of hedge funds that had bought the shares in Q3 2024.
For these stocks, we also mentioned the number of hedge fund investors. Why are we interested in the stocks that hedge funds invest in? 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).
Eli Lilly and Company (NYSE:LLY)
Number of Hedge Fund Holders In Q3 2024: 106
Date of Cramer’s Comments: 8-20-24
Performance Since Then: -18.28%
Eli Lilly and Company (NYSE:LLY) has been the star of the pharmaceutical industry over the past year or so due to its weight loss drugs. However, with the weight loss drug industry now facing entry of low-cost options, the stock has been under pressure. Year-to-date, Eli Lilly and Company (NYSE:LLY)’s shares are up by 31% but they have lost 15% over the past six months. Within the six-month performance, two dips are particularly notable. One of these saw the stock drop by 14% in the first week of November after Eli Lilly and Company (NYSE:LLY)’s Mounjaro and Zepbound sales of $3.11 billion and $1.26 billion in Q3 fell short of analyst estimates of $4.20 billion and $1.69 billion. Here’s what Cramer said in August:
“Eli Lilly (LLY) has announced that its novel weight loss and diabetes drug can reduce the risk of developing type 2 diabetes by 94%—and that’s not in the general population but among pre-diabetic adults who are already prone to it. Add this drug’s ability to aid in weight loss, and we’re likely moving toward a future where people are less concerned about diet and exercise. After all, what they’re doing now isn’t working as well as Lilly’s tirzepatide.
“People often lack the discipline and willpower to maintain diets and workout regimens, which contributes to obesity and type 2 diabetes—a serious condition we hear so much about. While we’ve heard about revolutionary GLP-1 drugs for some time, there was always skepticism about their long-term performance. However, the results from the 176-week trial on Lilly’s tirzepatide are game-changing in the fight against diabetes. The average patient lost 23% of their body weight, which makes it more likely that the FDA will approve the drug for widespread use.
“With no real alternative, it’s hard to see how insurance companies can avoid covering these GLP-1 drugs. I feel more optimistic about this after David Ricks, CEO of Eli Lilly, mentioned this morning on Squawk on the Street that the drug will save the healthcare system a lot of money. The initial question was whether these drugs, including tirzepatide—a dual-acting GLP-GIP inhibitor—not only keep you thinner but also healthier. We’re beginning to see that they do. Even though the federal government doesn’t cover these drugs, and many employers don’t either, they should. This will save money for our country in the long term and promote healthier, longer lives.
“I’ve been a huge supporter of Eli Lilly for ages, and it remains a major position in the Trust. This news will likely attract new believers. David’s assurance that they’re working on various formulations—such as pill forms, monthly shots, and multi-dose injectables—shows their commitment. They’re investing $18 billion to build manufacturing facilities for these drugs, a feat few other companies can afford. While competitors may have something up their sleeves, right now, Lilly is the clear leader, with Novo Nordisk in second place. The rest are still stuck in the FDA approval process, which could take years.
“Lilly started this journey back in 2016, and the competition is nowhere near catching up. There’s a significant misunderstanding about what this drug can achieve. It’s not just for weight loss and diabetes; it will be prescribed for conditions like congestive heart failure, liver disease, hypertension, and more. It might even become a treatment for alcoholism and sleep apnea. That’s why I believe Eli Lilly, currently worth $92 billion, could eventually join the trillion-dollar club.
“Everyone is searching for a drug company that can challenge Lilly, but Lilly’s deep moat and protection from competition make it hard to beat. Although the stock didn’t close above its previous highs today—potentially signaling a double top—I urge you to think bigger. One day, we’ll recognize that tens of millions of people have been freed from the constraints of diet and exercise regimens, thanks to Eli Lilly.”
Overall, LLY ranks 2nd on our list of healthcare stocks Jim Cramer has made bold predictions about. While we acknowledge the potential of LLY as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than LLY 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.