Off The Charts – ABT & JNJ

For the “Off The Charts” segment, Cramer went up against his colleague at TheStreet.com Dan Fitzpatrick over the charts of health care stocks, Abbott Laboratories (NYSE:ABT) and Johnson & Johnson (NYSE:JNJ), the former which Cramer holds in his charitable trust. Fitzpatrick thinks that Abbott Labs is about to beak out to the upside, while Johnson & Johnson is setting up to break down. Fitzpatrick pointed out that Abbott Labs traded below its 200-day moving average for seven months, but the stock has now started to make higher highs and lower lows and when it does pullback it happens on light volume. Abbot has been trading in a narrow range between $50 and $52.50 and now looks ready to break out. He said that Johnson & Johnson has been stuck in a tight $2.50 range, or trading channel, since the end of July. Since then, volume has been weakening, which could be signaling the stock is setting up to head lower. Moving on to the fundamentals, Cramer said he agrees with Fitzpatrick. He mentioned that from a fundamental standpoint, Abbott is the better company and is using the economic slowdown to get stronger.  The company beat earnings estimates when it reported on Oct. 14 and raised its guidance, all due to increased revenues. “J&J, however, manufactured their earnings beat,” Cramer said. He explained that the company only beat by cutting R&D spending and by getting a favorable tax rate. Cramer mentioned that J&J also has long-term patent problems with four key drugs – Floxin for chemotherapy, Remicade for autoimmune disease, Velcade for blood cancer, and Risperdal for anti-psychotic issues. “J&J looks to be falling off a patent cliff and is not making up for it with new products, which right now account for just 5% of sales,” Cramer said. He told viewers that Abbott is growing at 11% a year, while J&J is only growing at 7%. “The fundies tell the exact same tale as the charts, and that’s why I would be a buyer of Abbott and a seller of J&J,” Cramer said. Get the scoop on tomorrow’s hottest trade ideas – TODAY! BeaconEquity.com PREMIER PICKS have an amazing track record. Join this select group and ride the profit wave!


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