We are in the process of purchasing 25 shares of Danaher at approximately $229 per share. Post Monday's trading, Jim Cramer's Charitable Trust will hold 550 shares of DHR, thereby increasing its weightage from 3.4% to roughly 3.6%. The healthcare sector has faced significant setbacks since the election. If the SPDR Health Care Sector Fund, commonly known as the XLV, trades lower on Monday, it will mark its sixth consecutive negative session. This group is grappling with a wave of uncertainty following President-elect Donald Trump's selection of Robert F. Kennedy Jr., a vaccine skeptic and obesity drug critic, to lead the Department of Health and Human Services. Uncertainty is something the market detests the most as it can lead to sharp declines in stock prices when policy directions are unclear. However, uncertainty also presents opportunities. We never underestimate risks, but at a certain point, a stock may price in too many potential changes, factoring in outcomes that might be overly severe. If real-life events turn out to be better than initially feared, then picking up high-quality healthcare stocks at these prices could prove to be a good deal. We are not making large purchases here as the overhang of uncertainty may persist for some time, but some of these stocks have become oversold. That's why we are focusing on a couple of healthcare stocks that have been under pressure in the past couple of weeks. Since the election, Danaher shares have dropped from $250 each to $230, while Eli Lilly shares have fallen from $806 to $720.Positive Quarter for Danaher
Danaher reported a better-than-expected quarter with a resurgence in growth in its bioprocessing business. Bioprocessing involves the use of cell components to produce various products, including targeted therapies like vaccines. During the COVID-19 pandemic, Danaher received a significant amount of business from vaccine makers. Part of the reason for the pressure on Danaher after Robert F. Kennedy Jr.'s appointment is concerns about funding for the National Institutes of Health, the country's national medical agency and a part of HHS. But, as estimated by Leerink analysts in a research note on Monday, less than 1% of Danaher's revenue is exposed to NIH funding. Another aspect of Danaher's risk is if pharmaceutical companies reduce their research and development due to regulatory changes. This is something to keep an eye on in the future, but we believe that Danaher stock, trading at around 27 times 2025 earnings estimates, already reflects some of this risk.Disappointing Quarter for Eli Lilly
Eli Lilly shares fell from $903 to $846 after a disappointing third-quarter report. Inventory destocking of its fast-selling GLP-1 medications caused the company to miss estimates and lower its full-year guidance. We were concerned about Eli Lilly's messaging after the quarter, but were encouraged in the following days when management reiterated to the analyst community that the miss was purely due to destocking and not based on fundamentals or underlying demand. However, the possible appointment of Robert F. Kennedy Jr. has created a lot of uncertainty for Eli Lilly and the broader drug stocks. Last week, we pointed out Robert F. Kennedy Jr.'s criticism of obesity drugs, with his two main concerns being pricing and his belief that dietary and food-system changes are the better approach to address high obesity rates. Certainly, pricing may become a more significant issue in the future, but there is no denying the science and the medicine's ability to treat obesity and other conditions. The recent correction in Eli Lilly has pushed its shares to trade slightly above 30 times the consensus 2025 adjusted earnings per share estimate on FactSet of $22.52. If we look ahead to 2026, Lilly shares are trading at around 24 times. While these multiples are higher than other drug stocks, we consider it to be a bargain given the company's top-tier growth that will continue as GLP-1 supply capacity catches up with demand. Another important point to remember is that Eli Lilly faces no major patent cliff or IRA pricing exposure in the rest of the decade.(Jim Cramer's Charitable Trust is long DHR, LLY. For a full list of the stocks, please refer here.)As a subscriber to the CNBC Investing Club with Jim Cramer, you will 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 discussed a 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.
