We're adding to our positions in technology and health care on post-earnings pullbacks

Published Mon, Jul 31 202312:49 PM EDTUpdated Mon, Jul 31 20231:45 PM EDT

We are buying 225 shares of GE Healthcare (GEHC), at roughly $76.84 each, and 45 shares of Microsoft (MSFT), at roughly $334.26 apiece. Following Monday's trades, Jim Cramer's Charitable Trust will own 750 shares of GEHC, increasing its weighting to 1.95% from 1.38%, and 200 shares of Microsoft, increasing its weighting to 2.28% from 1.78%. Following Monday morning's exit of Johnson & Johnson , we are putting money to work in two companies that have pulled back after earnings and represent much cleaner opportunities than the talc-litigation risk of J & J. The first position we are adding to is GE Healthcare Technologies . The company reported a clean earnings beat last week and raised its full-year organic revenue growth and adjusted earnings per share (EPS). New orders up 6% were also better than expected, improving from the 3% increase the company saw in the first quarter. GE Healthcare fared much better than Dutch peer Phillips, which last week said its orders fell 8% in the second quarter. The difference in the two order rates suggests GE Healthcare is gaining market share. The medical-technology firm is seeing good momentum in its business, partly because many health-care providers are investing to improve patient care and productivity. But what's not in the numbers yet – and what we see as a major opportunity for 2024 and beyond – is the role the company plays in supporting the launch of Alzheimer's therapies. From the screening phase, through assessment, diagnosis, treatment and monitoring, GE Healthcare's products — including MR and PET scanners, amyloid imaging, and digital solutions — have touchpoints at every key stage in a patient's journey. We've been patient about adding to this position following earnings on concerns that General Electric (GE), from which GE Healthcare was spun off earlier this year, would monetize its next tranche of shares soon through a secondary offering. While this is still a possibility to be mindful of – and to leave room for in the position – the stock falling 5% after a great quarter looks like an opportunity. The other stock we are adding to is Microsoft , and we are upgrading our rating to 1. While this trade violates our low-average cost basis, the stock is down roughly 5% since reporting a solid quarter last week and the dip is worth buying. This isn't the first time we've seen a market leader pull back on earnings. What usually happens is that the stock is pressured for a few days as "hot money" traders shake out of the stock. Next, it stabilizes, and the rally ultimately resumes, as long as the fundamentals remain positive. And in the case of Microsoft, we believe that to be the case. While some investors took issue with Microsoft's slightly light revenue guidance for the current quarter, it's important to remember that it is still in the infancy stages of monetizing generative artificial intelligence, in which it is a clear leader, through Azure AI and Copilot. Additionally, management's guidance of flat margins likely was them practicing UPOD — under promise, over deliver. (Jim Cramer's Charitable Trust is long GEHC, MSFT. 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.

Traders work on the floor of the New York Stock Exchange on April 21, 2023 in New York City.

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