These are the top 4 Club stocks — and the bottom 4 — during the third quarter

Published Sat, Sep 30 20232:01 PM EDT

Kevin Stankiewicz @in/kevin-stankiewicz-b5593466 @kevin_stank

September, historically the worst month of the year for stocks, once again brought pain to Wall Street, sending the market lower for the third quarter. A steep rise in Treasury yields and oil prices, combined with fears that the Federal Reserve would keep interest rates "higher for longer," weighed on stocks over the past four weeks or so. The monthly losses dragged the Dow Jones Industrial Average , the S & P 500 and the Nasdaq into negative territory for the quarter, following an impressive first six months of the year. In the third quarter, the Dow lost 2.6%, the S & P 500 fell 3.65%, and the Nasdaq dropped 4.12%. The past three months proved to be a mixed bag for our 35-stock portfolio, with some stellar performers — led by Eli Lilly (LLY) — and some troubling laggards such as Foot Locker (FL). Here's a look at the top four and bottom four Club stocks in the third quarter as Wall Street gears up for the first trading day of the fourth quarter on Monday. The winners LLY mountain 2023-06-30 Eli Lilly's stock performance in the third quarter. Eli Lilly owns the third-quarter crown, rising 14.53% over the past three months to push its year-to-date gains to 46.8%. The turning point in the quarter for Lilly's stock came on Aug. 8 when it surged nearly 15% and catalyzed a multiweek rally to fresh all-time highs. Before the open on Aug. 8, Lilly reported stellar earnings fueled by diabetes drug Mounjaro, which should be cleared soon by U.S. regulators for weight loss, too. That morning, rival pharmaceutical firm Novo Nordisk (NVO) also released long-awaited trial results showing its anti-obesity drug Wegovy — in the same class as Mounjaro — reduced the risk of cardiovascular problems such as strokes and heart attacks. Investors and analysts viewed the data as strengthening the health insurance reimbursement case for drugs like Wegovy and Mounjaro. Our discipline required us to book profits in Lilly's stock during the quarter, despite our confidence in its multiyear growth outlook. We sold 40 shares on Sept. 12, the same day Eli Lilly hit its all-time closing high of $599.30. The stock has declined about 9% from that peak. CAT mountain 2023-06-30 Caterpillar's stock performance in the third quarter. Next up: Caterpillar (CAT), which saw its stock climb 10.95% in the third quarter. Shares of the industrial giant began the quarter with a solid July performance , as did many of its peers in the sector after a bleak start to 2023. Caterpillar's most important day of the Q3 came on Aug. 1 when it reported earnings for the three months ended June 30. The very strong report sent Caterpillar shares to an all-time high, shutting down the bears who in the first half of the year worried that Caterpillar's backlog and margins were peaking. Since its record close of $288.65 per share on Aug. 1, the stock has dropped slightly — closing at $273 per share on Friday. Nevertheless, Caterpillar remains well-positioned to benefit from the flood of federal infrastructure spending in the coming years. PXD mountain 2023-06-30 Pioneer Natural Resource's stock performance since the end of the second quarter. Pioneer Natural Resources (PXD) occupies the third spot, advancing 10.8% in the third quarter as oil prices rallied. West Texas Intermediate crude eclipsed $95 per barrel during Thursday's trading — its highest level since Aug. 30, 2022 — before settling the session lower. The American oil benchmark fell again Friday but held above $90, settling up 28% in Q3 . The move in WTI from under $70 in mid-June has not been a straight line higher. But it, nevertheless, has supported Pioneer stock. The strength in oil should help boost free cash flow for the Permian Basin-focused exploration and production (E & P) company. That extra cash can then be returned to shareholders via dividend payments and stock buybacks. The more cash that's generated, the better. Pioneer is known to be an efficient operator, a fact showcased in the company's third-quarter guidance issued on Aug. 1. Pioneer was able to reduce its full-year capital budget outlook while still raising its total production forecast. GOOGL mountain 2023-06-30 Alphabet's stock performance since the end of the second quarter. Alphabet (GOOGL) edged out Humana (HUM) for the No. 4 spot, rising 9.3% in the quarter. The key moment for the Google parent came on July 25, when it released very strong second-quarter results after the bell. Over the next few sessions, the stock jumped more than 8%. Since the close on July 31, though, the stock is down slightly. To be sure, with what's happened to the market overall and tech stocks in particular, treading water is still outperformance. In the third quarter, Google's stock has been helped by a growing realization that the tech giant is not as far behind Microsoft (MSFT) in the artificial intelligence race as previously thought. Fears that Microsoft's retooled, AI-focused search engine Bing would eat into Google Search's market share have been overblown. The third-quarter winners span a wide range of market sectors — from health care to energy to industrials. But a common theme for all four companies is that their earnings reports released during the quarter demonstrated their quality fundamentals and satisfied investors. Of course, these winners didn't necessarily embark on a one-way march higher in Q3, but the strength of their most-recent results stands out in what proved to be a tough quarter for the overall market. The laggards FL mountain 2023-06-30 Foot Locker's stock performance since the start of the third quarter. Foot Locker was the worst-performing Club stock in the third quarter, falling 36% as its turnaround story has still yet to materialize. The optimism in early 2023 around CEO Mary Dillon's revitalization strategy has disappeared, following back-to-back terrible quarterly reports. The most recent results caused a 28% plunge in the stock on Aug. 23 and forced us to adopt a 4 rating . While we knew this wouldn't be an overnight success story, the challenges facing Foot Locker have proven to be more substantial than expected. Jim Cramer said during our September Monthly Meeting that he's willing to give Dillon one more quarter to demonstrate progress on the turnaround. EL mountain 2023-06-30 Estee Lauder's stock performance since June 30. Estee Lauder (EL) shares steadily declined throughout the quarter, ultimately dropping 25.44% over the past three months, as investors remained concerned about challenges facing the cosmetics giant in its key Asia travel retail segment. Estee Lauder is not only our second-worst performing stock in Q3 but also year to date, with only Foot Locker falling further. Estee Lauder reported better-than-feared fourth-quarter results on Aug. 18, but its full-year fiscal 2024 guidance came in well below Wall Street estimates, a sign that issues may persist another quarter or two. With the stock now below $145 per share Friday, we're willing to be patient in hopes that CEO Fabrizio Freda can work his magic once again. F mountain 2023-06-30 Ford Motor's stock performance since the end of the second quarter. The third-worst Club stock in Q3 was Ford (F), with shares falling 17.9% in the period, to $12.42 each. Despite delivering promising quarterly results in late July, investors grew more cautious in August as worries mounted about a possible United Auto Workers strike. Indeed, the UAW work stoppage began on Sept. 15, with targeted actions against Ford, General Motors (GM) and Jeep-parent Stellantis (STLA), collectively known as the Detroit Three. On Friday, the UAW broadened its actions against Ford to include an assembly plant in Illinois. The union on Friday widened its strike again at GM. Stellantis was spared Friday, though it saw expanded action last week along with GM. Ford was spared last week. Our view has been to hold onto Ford amid the strike overhang — not buying, but not selling either. "I think the situation is in flux. I don't want to bail when everyone thinks that the auto companies can only lose," Jim said during the Monthly Meeting. Despite the back-and-forth and aggressive posturing from the UAW, Ford shares actually rose 2.4% in the month of September. Since the strike started on Sept. 15, specifically, the stock is down 1.6%, far outperforming the nearly 5% drop in the S & P 500 during the same stretch. GEHC mountain 2023-06-03 GE Healthcare's stock performance since June 30. GE Healthcare (GEHC) dropped 16.25% in the third quarter, making it the fourth-worst performer in our portfolio. In the first few weeks of the quarter, shares of the medical equipment giant actually edged higher, but its fortunes would turn significantly. The stock plunged nearly 23% between July 21 and Sept. 21, a stretch in which the company delivered a solid beat-and-raise quarter . As befuddling as GEHC's slide has been, we've bought multiple times on the way down, most recently on Sept. 5 , using the weakness to lower our cost basis and build a bigger position in a company we see well-positioned to benefit from the rollout of new Alzheimer's therapies. GEHC makes the MRI, CT scan and PET scan machines needed to evaluate potential Alzheimer's drug candidates and monitor patients already being treated. Fortunately, there's been some momentum in the stock lately, up more than 6% this week alone. The third-quarter laggards are a diverse bunch — there's two companies with challenged near-term fundamentals, in Estee Lauder and Foot Locker, while Ford and GE Healthcare's struggles have been tied to other factors. In Ford's case, the strike has dampened sentiment. For GEHC, we believe investors have missing the forest from the trees, given the company's compelling multiyear opportunity to grow revenues and margins. (Jim Cramer's Charitable Trust is long LLY, CAT, PXD, GOOGL, FL, EL, F and GEHC. 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.

This picture shows an unit dedicated to the production of insulin pens at the factory of the US pharmaceutical company Eli Lilly in Fegersheim, eastern France.

Frederick Florin | AFP | Getty Images

September, historically the worst month of the year for stocks, once again brought pain to Wall Street, sending the market lower for the third quarter.