Jim Cramer Says Cardinal Health Inc. (CAH) Has Built a More Stable Foundation and Delivered Impressive Results After Losing OptumRx Business

We recently compiled a list of the Jim Cramer’s Top 10 Bullish StocksIn this article, we’ll examine where Cardinal Health Inc. (NYSE:CAH) stands relative to Jim Cramer’s other bullish stock picks.

On a recent episode of Mad Money, Jim Cramer expressed his enthusiasm for the current market, highlighting an important historical perspective. He reminded viewers that 20 years ago, Google went public at $85 per share and closed its first day up 18%. While many traders were thrilled by that initial gain, in hindsight, it was a major missed opportunity. The stock has since returned 7,736%, far outpacing the S&P 500’s return of just over 600%. This example illustrates the potential wealth that individual stocks can offer relative to broader indices, especially if you choose wisely.

“Twenty years ago today, Google went public at $85 per share, with no adjustments to value. The stock closed up 18% on its first day. Many traders, thrilled by the initial gain, cashed in on the profit. In retrospect, it was one of the biggest mistakes of all time. The company has since returned 7,736%, compared to a return of just over 600% for the dividend-paying S&P 500. It’s a reminder of the wealth that individual stocks can generate relative to indices when you make smart choices. And I’m telling you, it’s not that hard if you know how to do your research. So I think it’s time to reconsider the average approach, at least for today.”

Cramer noted that despite strong recent performance (the Dow is up 237 points, the S&P 500 is up 0.97% and the NASDAQ is up 1.39%), the near-term outlook for the market is more complex. The market is currently on its longest winning streak since November of last year, with 93% of S&P 500 stocks posting gains.

He cautioned, however, that the market may be “overbought,” as indicated by the Market Edge Oscillator, a tool Cramer has relied on since 1987. When the oscillator reaches plus five or above, it signals that it may be time to sell. Conversely, readings of minus five or below indicate oversold conditions, suggesting that it’s a good time to buy.

“While it was another good day for the markets, we need to consider both the short-term and long-term outlook. The short-term picture is not as favorable. We are currently on a significant winning streak, with the market up for several consecutive days, the longest streak since November of last year. It is impressive to see that 93% of the S&P 500 stocks are up.”

This follows a Monday when the market fell sharply due to the implosion of the yen carry trade, leading to a wave of forced selling and the panic that followed.

“As I have often said, panic is not a strategy. Since this panic, the market has been largely oriented upwards.”

Cramer also expressed concern about the upcoming Justice Department case against the search engine giant’s role in the ad exchange market. The court case could have a significant negative impact on the company, which has benefited greatly from the situation. A Justice Department victory could be even more damaging than the previous litigation with Apple over default payments from search engines, which contributed to its monopoly concerns.

According to Cramer, the resilience of tech giants is evident, with strong recoveries even after short-term declines.see The 33 Most Important AI Companies You Should Pay Attention To).

Jim Cramer points out that investing in truly exceptional companies, rather than simply following stock indices, generally leads to the best returns. Cramer advises investors to avoid panicking during market fluctuations and focus on owning solid companies to ensure their long-term success.

“As we move forward, it’s important to remember that investing in very large companies, rather than simply following the index, often yields the best returns. Google’s substantial gains over 20 years are a perfect example. Avoiding panic in times of market turbulence and sticking with strong companies is critical to long-term success.”

Our methodology

In this article, we looked at a recent episode of Jim Cramer’s Mad Money series and highlighted ten stocks he’s bullish on. We’ve also included hedge fund sentiment information for each stock and ranked them by the number of hedge funds that own them, starting with the least owned.

At Insider Monkey, we’re obsessed with the stocks that hedge funds are heavily invested in. The reason is simple: Our research has shown that we can outperform the market by mimicking the best stock picks of the best hedge funds. Our quarterly newsletter strategy selects 14 small- and large-cap stocks each quarter and has returned 275% since May 2014, outperforming its benchmark by 150 percentage points (see more details here).

Cardinal Health Inc. (NYSE: CAH)

Number of investors in hedge funds: 39

Jim Cramer asked Cardinal Health Inc. (NYSE:CAH) CEO Jason Hollar in an interview with Mad Money how the company managed to quickly recover after losing the OptumRx business, especially since many had written it off. Despite the setback, Cramer noted that Cardinal Health Inc. (NYSE:CAH) had built a more stable foundation and delivered impressive results in the same quarter.

Jason Hollar noted that Cardinal Health Inc. (NYSE:CAH) earnings per share increased 29% for the quarter and full year, building on nearly 50% earnings growth over the past two years. This success was supported by nearly $7 billion in adjusted free cash flow and was driven by the resilience of the Pharma segment, which grew 8% in the fourth quarter.

Hollar also noted that its Global Medical Products and Distribution (GMPD) business saw significant year-over-year earnings growth, with an additional $240 million, largely driven by effective inflation mitigation measures. With $300 million of net inflation now mitigated, Cardinal Health Inc. (NYSE:CAH) is well positioned for continued growth, particularly in its smaller segments, which collectively generate $4 billion in revenue and maintain margins near 10%, with double-digit growth expected to continue.

Global CAH ranks 9th on our list of Jim Cramer’s top bullish stock picks. While we recognize CAH’s potential as an investment, our conviction lies in the belief that under-the-radar AI stocks have more promise to deliver higher returns, and in a shorter time frame. If you’re looking for an AI stock that’s more promising than CAH but trades at less than 5x earnings, check out our report on the the cheapest AI stock.

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Disclosure: None. This article was originally published on Insider Monkey.