Jim Cramer’s CNBC Investment Club releases Homestretch (an actionable afternoon update) every weekday, just in time for Wall Street’s close. Markets: The Dow and S&P 500 fell Friday after soaring to record highs on Thursday after the Fed cut interest rates by 50 basis points. It’s been a solid week for stocks, with the S&P 500 up about 1.5%. The best-performing sectors so far this week have been energy, communication services, financials and industrials. The only three sectors trending lower were real estate, consumer staples and health care. Obesity Drugs: New information often leads to one company’s stock rising while its biggest competitor falls. Let’s look at shares of Eli Lilly, the club’s name. The stock rose in a soft market after a major competitor for an obesity drug reported disappointing results from a Phase 2 trial. Its competitor, Novo Nordisk, announced on Friday that its drug Monlunabant, a small molecule oral cannabinoid receptor (CB1) inverse agonist, showed about 6% weight loss over 16 weeks. This was a big disappointment. The results fell short of Eli Lilly’s flagship oral GLP-1 Orforgliplon, which showed about 8% weight loss over 16 weeks, and well below what Novo had previously suggested. Deutsche Bank analysts called the trial results disappointing, adding that “the threat of large, well-capitalized small molecule competitors to LLY’s Orforgliplon has disappeared.” Competition in the obesity field will intensify in the coming years, but this disappointment from Novo Nordisk shows how hard it is to make safe and effective drugs. That’s why we’ve long opposed Eli Lilly being sold off every time a competitor issues a press release of an early-stage trial. Some drugs work, some don’t. Some are very effective, some don’t make any noticeable changes. Some drugs have safety and tolerability issues. That’s the nature of this business. But what we know now is that with its current lineup of obesity drugs, a strong pipeline, and large manufacturing scale, Eli Lilly’s leadership is not going anywhere anytime soon. Cybersecurity stocks: In other scenarios, both the company and its competitors can rise in trading on new news. Crowdstrike shares rose after the cybersecurity company held its annual conference. One key thing that emerged from the event was how little customer churn there was in the aftermath of the global IT outage the company caused in July. Recall that we initially saw competitors such as club-name Palo Alto Networks using the event to promote their products. But we can’t say we’re at all surprised that so few customers are leaving Crowdstrike. Palo Alto’s quarterly earnings in August did not show any major market share shifts due to the outage. Certainly Palo Alto’s products and value proposition are great, so the quarterly earnings were good, but they didn’t suggest any major departures from Crowdstrike. Both companies are great. So why isn’t Palo Alto’s stock price falling? CrowdStrike’s comments likely indicate that cybersecurity spending remains healthy, benefiting both companies. Next news: We’ll see a recovery in earnings next week. Notable reports include KB Home, which gives insights into housing, and Micron, which gives a good look at demand and inventory levels for high-bandwidth memory (which powers AI chips), as well as mobile phones and personal computers. Jefferies, which always gives a good look at banking prospects, and Club name Costco, a great read on consumer spending, are also coming out next week. (For a complete list of Jim Cramer’s charitable trust stocks, see here.) Subscribers to Jim Cramer’s CNBC Investment Club receive trade alerts before Jim makes a trade. Jim buys and sells shares in the charitable trust’s portfolio 45 minutes after sending a trade alert. If Jim talks about a stock on CNBC television, he will execute the trade 72 hours after issuing a trade alert. The Investment Club information above is subject to our Terms of Use and Privacy Policy, as well as Disclaimer. Receipt of any information provided in connection with the Investment Club does not create any fiduciary duty or liability. No particular results or benefits are guaranteed.
Every weekday, CNBC Investing Club with Jim Cramer releases “Homestretch,” an actionable afternoon update, just in time for the final hour of trading on Wall Street.