Jim Cramer’s Investing Club meeting Tuesday: Caterpillar, J&J, Humana

Every weekday the CNBC Investing Club with Jim Cramer holds a “Morning Meeting” livestream at 10:20 am ET. Here’s a recap of Tuesday’s key moments. Opportunity to buy Caterpillar Confident in decision to buy Johnson & Johnson Why buy ahead of an overhang? 1. Opportunity to buy Caterpillar Shares of Caterpillar (CAT) were down 4.2% mid-morning Tuesday after the company reported earnings before the bell. The industrial firm’s results were strong overall, though, considering beats on revenue and margin expansion in all three segments. Caterpillar also expects sales and earnings to grow above 2022 levels in the year ahead. Its strong core numbers tell us that the market’s reaction was misguided and represents a buying opportunity for investors. 2. Why we bought more Johnson & Johnson Shares of Johnson & Johnson (JNJ) fell Tuesday after a US appeals court on Monday dismissed the pharmaceutical giant’s bankruptcy strategy for tens of thousands of lawsuits concerning the company’s talc products. We bought 50 shares of Johnson & Johnson (JNJ) at roughly $161.81 apiece shortly after the bell to take advantage of the market overreaction. While the company lost $16 billion in market capitalization in a single day, it’s unlikely that the company will see an incremental $16 billion in losses related to the lawsuit. We continue to like the company’s clean balance sheet, and bought the dip so we can enjoy the stock’s eventual run up. 3. Why buy ahead of an overhang? An overhang is an uncertain event that keeps investors on the sideline, thus preventing a stock from rallying until there is clarity. Shares of Humana (HUM) rose nearly 5% Tuesday after the US Department of Health and Human Services released the final rule for Medicare Advantage (MA) Risk Adjustment Data Validation audits. The stock’s rally is an example of how buying ahead of an overhang can go your way, and the immediate pop in the stock can be significant. Because the long-awaited Medicare decision was not as bad as feared, it removed the cap on HUM’s ability to soar higher. However, it’s important to understand that sometimes things don’t go your way. In this case, it worked. (Jim Cramer’s Charitable Trust is long CAT, HUM, JNJ. 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.