A flurry of news outside the portfolio has implications for 3 of our stocks

Published Thu, Apr 13 20234:54 PM EDTUpdated Thu, Apr 13 20235:35 PM EDT

First-quarter earnings season is about to kick off, and investors should be prepared to be inundated with endless headlines, news stories and analyses — some more useful than others — about a myriad of companies. While our general focus is on the 35 stocks currently in Jim Cramer's Charitable Trust, the reality is that any investor who wants to stay up-to-date needs to follow the news around the other major companies in the sector in which they're invested. By listening to what other companies are saying, we can better understand an industry and the potential implications for our holdings, all of which can inform our investment theses. Here are three noteworthy news developments over the past two days, which contain useful insights about our stocks. The news: French luxury goods maker LVMH Moët Hennessy Louis Vuitton reported strong earnings Wednesday, with organic sales up 17% year-over-year, compared with analysts' forecasts for a 10% increase — propelling shares to a new all-time high . The largest driver of the upside surprise came from its fashion and leather goods division, bolstered by resurgent Chinese buyers. But the perfumes and cosmetics unit was also a strong performer, with organic sales up 10%, compared with a consensus estimate of 7.54%. The bulk of those gains were mainly in Europe and the United States, as Asian travel retail has not fully rebounded from Covid-related restrictions. Still, management had positive things to say about spending habits in China since Beijing abandoned its zero-Covid policy late last year and has been gradually reopening its economy. "We definitely see a normalization of this market with people returning to our stores with the internet business picking up, so we are really back to where we were prior to the complicated period of 2022, so we are extremely hopeful and should benefit from a strong push from mainland China in 2023," CFO Jean-Jacques Guiony said. The Club's take : LVMH provides one of the best views into all things luxury, which is particularly relevant to prestige beauty holding Estee Lauder (EL). The main takeaway is that despite ongoing macroeconomic uncertainty, the wealthy are still spending money on luxury and high-priced goods. Estee Lauder's main overlap with LVMH is around perfume and cosmetics, so it was encouraging to see that overall spending in the category was strong for the French firm — helping explain the pop in EL shares we've seen since yesterday. While we would have liked to have seen more positive signs for travel retail — a key growth driver for Estee Lauder — Guiony's comments make clear that China is poised to rebound across the board, including in travel retail, this year. The news: Danish pharmaceutical group Novo Nordisk (NVO) on Thursday preannounced strong first-quarter results and materially raised its guidance for full-year sales and operating profit growth. In the first three months of the year, the company said sales increased 25% and operating profit grew 28%. For the full year 2023, Novo now expects sales growth in the range of 24% and 30%, compared to prior estimates of 13% to 19%. In addition, operating profit growth is expected to be in the range of 28% and 34%, up from a prior range of 13% to 19%. The upside is being driven by surging demand for Novo's popular obesity drug, Wegovy, with production starting to ramp up after being limited by a supply crunch last year. The company also said it saw continued strength in Ozempic — a diabetes medication that has the same active ingredient as Wegovy — mainly in the United States. The Club's take : The news bodes well for Club holding Eli Lilly (LLY). Unlike Novo, Lilly isn't a pureplay diabetes/obesity company — but it does share a similar best-in-class diabetes and obesity portfolio through drugs Trulicity and Mounjaro. Lilly hasn't been able to tap the full potential of Mounjaro yet because the U.S. Food and Drug Administration (FDA) hasn't approved it for obesity, but that's expected to happen later this year. Ultimately, we expect demand for Mounjaro to rival Wegovy, if not exceed it, due to its superior characteristics combined with Lilly's higher production capacity. The news: Shares of Sarepta Therapeutics (SRPT) fell today after health-care news outlet STAT News reported that some FDA members discussed rejecting the biotechnology firm's investigational gene therapy for Duchenne muscular dystrophy (DMD), before a top official ultimately intervened and scheduled a public advisory committee meeting. Sarepta stock closed down more than 9% Thursday, at $124.72 a share, on fears the therapy might not be approved. The Club's take: The news matters for contract drug manufacturer (CMO) Catalent (CTLT), which earlier this year entered into a commercial supply agreement with Sarepta to manufacture its DMD gene therapy candidate. We've been monitoring Catalent ever since early February , after Bloomberg reported Club holding Danaher (DHR) had an interest in buying the company. There are clear strategic benefits to acquiring a contract manufacturer based on Thermo Fisher Scientific 's (TMO) success with Patheon . But the market hasn't shared this view because it would be a divergence from Danaher's history of acquiring companies with high margins and recurring revenue. Danaher shares fell more than 2% on the news in February and the stock has been unable to gain any type of momentum since. It's unclear if Danaher is still interested in Catalent, but we're interested to know whether Sarepta's potential regulatory woes change its calculus. (Jim Cramer's Charitable Trust is long EL, LLY, DHR. 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. 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