We're buying up more shares of this pharmaceuticals play on weakness

Published Tue, Jan 31 20239:09 AM ESTUpdated Tue, Jan 31 20232:16 PM EST

Shortly after the opening bell, we will be buying 50 shares of Johnson & Johnson (JNJ) at roughly $161.81 apiece. Following Tuesday's trades, Jim Cramer's Charitable Trust will own 555 shares of Johnson & Johnson, increasing its weighting in the portfolio to about 3.06% from 2.78%. Shares of Johnson & Johnson were hit hard Monday after a federal appeals court rejected the company's bankruptcy strategy for tens of thousands of lawsuits related to the company's talc-based baby powder. J & J stock closed down 3.7% Monday, at $162 a share. And the company lost roughly $16 billion in market capitalization in a single day, a clear market overreaction. In the over five years of litigation to date, aggregate costs have reached $4.5 billion which is less than 7.5% of the $61.5 billion on the petition date. About half of those costs were attributed to one case. Johnson & Johnson has won the majority of talc cases brought against it since these lawsuits began. Johnson & Johnson has won the majority of talc cases brought against it since these lawsuits began. Through 41 trials so far, only nine trials were won by plaintiffs and are on appeal or resolved. J & J's talc litigation is far from over but the situation is containable, particularly given J & J's pristine balance sheet. It is highly unlikely J & J will face an incremental $16 billion in losses, equivalent to the market cap it lost yesterday — which is why we see this as a buying opportunity. Separately, Caterpillar shares are down roughly 1% in premarket trading after the industrial firm reported a drop in profit in the fourth quarter . But the numbers look strong, with sales up 20% year-over-year, to $16.6 billion, beating analysts' estimates of about $16 billion. Margins were excellent as well, expanding to 16.9% against expectations of 16.3%, with beats in all three segments due to a 13.2% increase in pricing that more than offset manufacturing costs. Although no specific earnings guidance was provided, management said it expects sales and earnings to grow above 2022 levels, indicating another strong year ahead. There is plenty of visibility into those earnings with Caterpillar's order backlog up about $400 million from the third quarter. Shares of CAT likely moved lower in response to an earnings-per-share (EPS) miss, with the company reporting EPS of $3.86 versus the consensus estimate of $4.02 a share. But that doesn't tell the full story of the quarter. Since the core operations were strong and the miss was due to an "other" item on its Caterpillar's reporting table, we think the weakness in the stock this morning is unwarranted and a buying opportunity. As the market comes to digest the quarter, we think CAT could reverse these early losses and potentially trade higher. (Jim Cramer's Charitable Trust is long JNJ, CAT. See here for a full list of the stocks.) 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 talked about 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.

A healthcare worker administers a dose of the Pfizer-BioNTech Covid-19 vaccine at a vaccination clinic in the Peabody Institute Library in Peabody, Massachusetts, U.S., on Wednesday, Jan. 26, 2022.

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