Cramer's Investing Club: We're starting a new trust position in a health stock

Published Mon, Dec 20 20212:56 PM ESTUpdated Fri, Jan 14 202212:05 PM EST

(This article was sent first to members of the CNBC Investing Club with Jim Cramer. To get the real-time updates in your inbox, subscribe here .) After you receive this note, we will be initiating a position in Bausch Health (BHC), buying 1,500 shares at roughly $24.68. Following the trade, Bausch Health will represent roughly 0.9% of the Charitable Trust. At a high level, we like the idea of increasing our health care exposure as it represents a defensive posture that we believe appropriate given the heightened uncertainty resulting from the Omicron variant. That is adding additional pressure to the global supply chain and reared its ugly headed at the same time that the Federal Reserve has shifted its view on inflation, noting that it will be around for longer than expected and that a quicker than previously anticipated tightening of monetary policy is therefore warranted. At the company level, we believe that CEO Joe Papa, has made significant progress in righting the Bausch Health (formerly Valeant) ship since he took over in mid-2016. First, when Papa took over, the company held over $30 billion of debt on its balance sheet; that figure has been reduced by $10 billion. Second, when Papa took over, the company was facing legal issues related to improper revenue recognition and misleading disclosures. These legacy legal issues were resolved in July 2020 when the company agreed to pay a $45 million penalty to settle the charges. Finally, while the two issues noted above were certainly priority issues, Papa also steered the company back on to a path of organic growth. That is a quick rundown of what has happened thus far, however, it is what is set to happen next that we believe makes Bausch Health an attractive investment. Thanks to Papa's intense multiyear focus on resolving legal issues, strengthening the balance sheet, and investing in growth (research & development as a percentage of revenue nearly doubled, to 6%, under his leadership), Bausch Health is in a position to unlock additional value via a three-way breakup. On Aug. 6, 2020, management announced its intention to spin off its Eye Health business, a move that would result in two separate companies: Bausch + Lomb, "a fully integrated, pure play eye-health company," and the remaining company, "a diversified pharmaceutical company with