Healthcare stocks were on fire, sending our 3 names to record highs
Every weekday, the CNBC Investing Club with Jim Cramer releases the Homestretch – an afternoon update that can work, during the last hour of trading on Wall Street. Stocks are lower on Friday, with the S&P 500 moving in and out of positive territory. For the week, the S&P 500 is on track to decline about 2%, continuing what has been a soft June for the broader market. Oil is down again, putting US WTI crude to close the week below $70 per barrel. Oil remained flat on Friday despite President Donald Trump saying on social media that Iran’s naval attack on ships in the Strait of Hormuz was a “stupid violation” of its ceasefire deal and US interest rates were low, with the 10-year Treasury yield below 4.4%. As the AI theme returns this week, investors are once again interested in healthcare. The sector rose more than 7% this week, putting the group at the top of the S&P leaderboard for June, ahead of industrials and financials. The club’s healthcare names Cardinal Health , Johnson & Johnson and Eli Lilly all outperformed the market and were on pace for record closes in Friday’s session. Nothing has changed from one week to the next in these stocks; this was about market positioning and rotating high-flying AI stocks. Whether this is some kind of month-end or quarter-end fluctuation remains to be seen. Software had a similar rally at the end of May, but the market’s enthusiasm proved short-lived. At least with healthcare, the sector doesn’t have the same kind of AI disruption weighing on it. After fighting with Cardinal Health for much of the spring, we adjusted our position on Thursday to ensure we don’t waste our hard-earned, but hard-earned money. Next week brings Honeywell’s long-awaited split into two independent companies. Shareholders will receive one share of Honeywell Aerospace (ticker: HONA) for every two Honeywell shares they own. Following the spin, the remaining company, which will be called Honeywell Technologies, will undergo a 1-for-2 stock split. We plan to own both portfolio companies. Analysts at RBC Capital began coverage on Honeywell Aerospace on Friday with an equal buy rating and a $300 price target. We agree with RBC’s belief that Aerospace is positioned for strong growth in the coming years. Honeywell Aerospace also looks cheap out of the gate, trading at a discount to peer RTX Corporation on an enterprise value to EBITDA (earnings before interest, taxes, depreciation and amortization) basis. We view the Technologies side of Honeywell as more of a showcase story given the significant portfolio restructuring that has taken place over the past few years, eliminating slow-growth, low-income businesses while making acquisitions designed to accelerate growth and improve earnings quality. Honeywell Technologies will focus on design, industrial and process automation. Also on our radar next week is Nike’s earnings report on Tuesday after the closing bell. It is a make-or-break quarter for the athletic footwear and apparel company’s portfolio. On the economic data side, the jobs week. The June nonfarm payrolls report will be released on Thursday instead of the usual Friday because the market is closed on Friday for the Independence Day holiday. (See here for a full list of stocks from Jim Cramer’s Charitable Trust.) 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 stock in his charity portfolio. When Jim talks about a stock on CNBC TV, he waits 72 hours after issuing a trade warning before making a trade. THE PRIVATE INFORMATION OF THE BURNING CLUB IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY, AND OUR PRIVACY POLICY. NO LEGAL LIABILITY OR OBLIGATION EXISTS, OR IS CREATED, BY YOUR ACCEPTANCE OF ANY INFORMATION PROVIDED BY CONTACTING THE INVESTMENT CLUB. NO PARTICULAR RESULT OR INTEREST IS GUARANTEED.
