Health Care Enjoys Mutual Funds' Affection

Lehman upgrades Schering-Plough (SGP - commentary - Cramer's Take) because the numbers are too low on the Organon acquisition and the return of the cholesterol drug sales. Johnson & Johnson (JNJ - commentary - Cramer's Take) blows away the numbers and talks a good game. Genentech (DNA - commentary - Cramer's Take) looked bad, but go read Adam Feuerstein's comments in the Columnist Conversation and you will get a sense of what's really going on.

When you put all of these together, you can see what's happening. This group has earnings momentum, and not just because of the weak dollar, which of course remains weak. Remember, mutual fund money has to go somewhere. Financials are too toxic to own.

So what happens? The mutual funds look for sectors to hide in and to overweight. Health care is one of those segments.

One of the things that people don't realize -- something that my friend Sheryl Skolnick, the best health care analyst I know who hails from CRT Capital, knows -- is that health care is a shrinking segment. The hospitals have been taken private, the HMOs are too dangerous, and many other parts of health care are just too small for most big mutual funds to sink their teeth in. Pharma, medical devices and biotech are the only areas that can handle the money.

The results you are seeing this morning, coupled with the possibility of the S&P futures getting hammered, might create the opportunity to get in this group ahead of the big boys if you currently don't own any. Remember that there's been a long-term bear market in health care, and it is, at last, ending.

Random musings: The heat on Sen. Schumer is a joke. IndyMac (IMB - commentary - Cramer's Take) was a terrible bank, and only he was willing to admit it. The bank should have been seized before the futile attempt by the FDIC to tell CEO Michael Perry to raise capital. This isn't Thornburg Mortgage (TMA - commentary - Cramer's Take). It had depositors. By the way, Countrywide would have had a similar run by now, and Bank of America (BAC - commentary - Cramer's Take) could have bought it for nothing! ... Time to reconfigure the Dow? GM's (GM - commentary - Cramer's Take) too small. Soon Bank of America and Citigroup (C - commentary - Cramer's Take) might be!!

At the time of publication, Cramer was long Schering-Plough.

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