September, historically the worst month of the year for stocks, once again caused problems for Wall Street and sent the market lower in the third quarter. A sharp rise in Treasury yields and oil prices, as well as fears that the Federal Reserve would keep interest rates higher “for longer,” weighed on stocks over the past four weeks. The monthly losses dragged the Dow Jones Industrial Average, S&P 500 and Nasdaq into negative territory for the quarter after 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 lost 4.12%. The last three months have been mixed for our 35-stock portfolio, with some standouts – led by Eli Lilly (LLY) – and some worrisome laggards like Foot Locker (FL). Here’s a look at the top four and bottom performers of club stocks in the third quarter as Wall Street prepares for the first trading day of the fourth quarter on Monday. The Winners LLY Mountain 2023-06-30 Eli Lilly’s third quarter stock performance. Eli Lilly owns the third-quarter crown, rising 14.53% over the past three months, bringing its year-to-date gain to 46.8%. The turning point in the quarter for Lilly shares came on August 8, when they rose nearly 15%, sparking a multi-week rally to new all-time highs. Ahead of its Aug. 8 opening, Lilly reported stellar gains fueled by diabetes drug Mounjaro, which is also expected to soon be approved by U.S. regulators for weight loss. This morning, rival pharmaceutical company Novo Nordisk (NVO) also released long-awaited trial results showing that 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 said the data strengthened the case for health insurance reimbursement for drugs like Wegovy and Mounjaro. Our discipline required us to book profits on Lilly stock during the quarter, despite our confidence in the company’s multi-year growth prospects. We sold 40 shares on September 12, the same day Eli Lilly hit its all-time closing high of $599.30. From that peak, the stock has fallen about 9%. CAT Mountain 2023-06-30 Caterpillar stock performance in the third quarter. Next up: Caterpillar (CAT), whose stock price rose 10.95% in the third quarter. The industrial giant’s shares began the quarter with a solid performance in July, as did many of its peers in the industry after a dismal start to 2023. Caterpillar’s biggest day in the third quarter was August 1, when the company reported results for the three quarters Months announced ended on June 30th. The very strong report pushed Caterpillar shares to an all-time high and ruled out the bears who feared Caterpillar’s backlog and margins were peaking in the first half of the year. The stock has fallen slightly since its record closing price of $288.65 per share on August 1, closing at $273 per share on Friday. Still, 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 stock performance since the end of the second quarter. Pioneer Natural Resources (PXD) is in third place, rising 10.8% in the third quarter due to rising oil prices. West Texas Intermediate crude oil topped $95 a barrel in Thursday trading – its highest level since August 30, 2022 – before turning lower in the session. The American oil benchmark fell again on Friday, but remained above the $90 mark and rose 28% in the third quarter. The rise in the WTI price from below $70 in mid-June was not a straight upward trend. But it still supported Pioneer stock. Oil’s strength should help boost free cash flow for the Permian Basin-focused exploration and production (E&P) company. This additional money can then be returned to shareholders through dividend payments and share buybacks. The more money generated, the better. Pioneer is known for being an efficient operator, a fact reflected in the company’s third-quarter guidance issued on August 1. Pioneer was able to reduce its full-year capital expenditure forecast while simultaneously increasing its overall production forecast. GOOGL Berg 2023-06-30 Alphabet stock performance since the end of the second quarter. Alphabet (GOOGL) edged out Humana (HUM) to No. 4, rising 9.3% in the quarter. The defining moment for Google’s parent company came on July 25, when it reported very strong second-quarter results after the bell. Over the next few sessions, the stock rose more than 8%. However, the stock has fallen slightly since the market closed on July 31st. Of course, given what’s happened to the market overall and tech stocks in particular, treading water is still an outperformance. In the third quarter, Google shares benefited from growing realization that the technology giant is not as far behind Microsoft (MSFT) in the race for artificial intelligence as previously thought. Fears that Microsoft’s retooled, AI-focused search engine Bing would eat into Google search market share are overblown. Third quarter winners span a wide range of market sectors, from healthcare to energy to industrials. What all four companies have in common, however, is that their earnings reports released during the quarter demonstrated the quality of their fundamentals and satisfied investors. Of course, these winners didn’t necessarily follow a lopsided upward trajectory in the third quarter, but the strength of their recent results stands out in a quarter that proved difficult for the overall market. The Laggards FL Mountain June 30, 2023 Performance of Foot Locker shares since the beginning of the third quarter. Foot Locker was the club’s worst-performing stock in the third quarter, falling 36% as it still faces a turnaround. Optimism heading into 2023 about CEO Mary Dillon’s revitalization strategy has vanished after back-to-back terrible quarterly reports. The latest results caused the stock to plunge 28% on August 23, forcing us to give it a rating of 4. While we knew this wouldn’t be an overnight success story, the challenges Foot Locker faced proved to be bigger than expected. Jim Cramer said during our monthly meeting in September that he was willing to give Dillon another quarter to demonstrate progress on the turnaround. EL Berg 2023-06-30 Estee Lauder stock performance since June 30th. Estee Lauder (EL) shares fell steadily throughout the quarter, ultimately falling 25.44% over the past three months as investors remained concerned about the challenges the cosmetics giant faces in its Asia- Travel retail segment. Estee Lauder is our second-worst performing stock not only in the third quarter 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 forecast for full-year 2024 was well below Wall Street estimates, a sign that problems could last another quarter or two. With the stock now trading below $145 per share on Friday, we’re willing to be patient in hopes that CEO Fabrizio Freda can work his magic once again. F Berg 2023-06-30 Ford Motor share price development since the end of the second quarter. The third-worst performing club stock in the third quarter was Ford (F), whose shares fell 17.9% to $12.42 apiece in the period. Despite reporting promising quarterly results at the end of July, investors became more cautious in August as concerns grew about a possible strike by the United Auto Workers. In fact, the UAW walkout began on September 15 with targeted actions against Ford, General Motors (GM) and Jeep parent company Stellantis (STLA), collectively known as the Detroit Three. On Friday, the UAW expanded its action against Ford to include an assembly plant in Illinois. On Friday, the union expanded its strike at GM again. Stellantis was spared on Friday but saw its action expand along with GM last week. Ford was spared last week. We were of the opinion that we wanted to hold on to Ford despite the strike overhang – not buy it, but not sell it either. “I think the situation is changing. “I don’t want to give up when everyone thinks the auto companies can only lose,” Jim said during the monthly meeting. Despite the back-and-forth and the UAW’s aggressive stance, Ford shares actually rose 2.4% in September. Notably, the stock has fallen 1.6% since the strike began on September 15, far outpacing the S&P 500’s nearly 5% decline over the same period. GEHC Mountain 2023-06-03 GE Healthcare stock performance since June 30th. GE Healthcare (GEHC) fell 16.25% in the third quarter, making it the fourth-worst performer in our portfolio. Shares of the medical device giant actually rose slightly in the first few weeks of the quarter, but things were about to change significantly. The stock plunged nearly 23% between July 21 and September 21, a period in which the company delivered a solid beat-and-raise quarter. As confusing as GEHC’s decline has been, we have bought several times on the way down, most recently on September 5th, and have used the weakness to reduce our cost base and build a larger position in a company we believe in that it is well positioned to benefit from the introduction of new Alzheimer’s therapies. GEHC makes the MRI, CT and PET scanning machines needed to evaluate potential Alzheimer’s drug candidates and monitor patients already on treatment. Fortunately, there’s been some momentum in the stock lately, up more than 6% this week alone. The laggards in the third quarter are varied – there are two companies with difficult near-term fundamentals, namely Estee Lauder and Foot Locker, while Ford and GE Healthcare’s problems are related to other factors. In the case of Ford, the strike dampened spirits. As for GEHC, we believe investors have missed the forest for the trees given the company’s compelling multi-year opportunity to grow revenue and margin. (Jim Cramer’s Charitable Trust is Long LLY, CAT, PXD, GOOGL, FL, EL, F and GEHC. See a full list of stocks here.) As a subscriber to CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim does trades. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable foundation’s portfolio. If Jim discussed a stock on CNBC television, he waits 72 hours after the trade alert is issued before executing the trade. 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This picture shows a system for producing insulin pens in the factory of the US pharmaceutical company Eli Lilly in Fegersheim, eastern France.
Friedrich Florin | AFP | Getty Images
September, historically the worst month of the year for stocks, once again caused problems for Wall Street and sent the market lower in the third quarter.