Update CVS Caremark (CVS)
Good news on December 21 for CVS Caremark (CVS) in bad news from Walgreen (WAG), the largest U.S. drugstore chain. (CVS Caremark is a member of my Jubak’s Picks 12-18 month portfolio http://jubakpicks.com/the-jubak-picks/ )
Walgreen reported earnings for the first quarter of fiscal 2012 of 63 cents a share. That was below the 67 cents a share expected by analysts. The bad news from Walgreen dropped the company’s share price by about 0.3% on December 21.
The biggest factors in the miss were a delay in the onset of flu season—that cut flu shots administered by the chain to 5 million through November 30 from 5.6 million in the same period n 2010—and Walgreen’s continued dispute with pharmacy benefit manager Express Scripts (ESRX). The two companies have not been able to resolve a dispute over pricing in a new contract. The old three-year agreement expired on December 31 and it looks like Express Scripts will take much of its business to other drug store chains.
And that’s the good news for CVS Caremark. CVS shares are up 2.7% from the close on December 21 to 1:30 New York time on January 3.
Exactly how much of Express Scripts $5.3 billion in annual revenue actually walks away from Walgreen after the company stops doing business with Express Scripts is still a huge unanswered question. Read more
Buy CVS Caremark (CVS)
So where’s the ‘Mo’?
Remember back on October 27 when stocks looked like they might rally through the end of the year? I asked then whether it was time to go with the momentum or move to the sidelines and wait for a pull back.
Today, just two weeks later, the question seems downright silly. Not only have we had that pullback but also it’s hard to find any momentum in this market at all. (Or at least any momentum to the upside.) I think there’s still a good chance for an end of the year bounce—if only because the world isn’t coming to an end, even in Italy, and the markets were pricing that in on Wednesday, November 9.
But momentum? You know where investors buy stocks that have moved up strongly because they think those shares will move up even more as other investors go chasing past gains? It’s just about impossible to find.
(I’d argue that in a bounce, on the other hand, it’s the stuff that has sold off most strongly that tacks on the gains.)
Almost impossible but not quite. There are a few pockets of momentum in even this current market, but they’re just not in the places that we usually look. I don’t see momentum in technology stocks, for example. In fact, recently the technology-heavy NASDAQ has lagged both the Dow Industrials and the Standard & Poor’s 500. (Yesterday afternoon, for example, as of 3:10 p.m. New York time the S&P 500 was up 0.61% and the NASDAQ Composite was down 0.07%.) Certainly not in financials. Commodities and raw materials stocks aren’t going anywhere as long as the dollar looks so much more attractive than the euro.
But how about names such as Wal-Mart (WMT), Eli Lilly (LLY) and CVS Caremark (CVS)?
In spite of all the scary news out of the EuroZone, these stocks have been moving up and look like they ready to break through resistance and party.
Check, let me rephrase that. Because of all the scary news out of the EuroZone, these stocks have been moving up. Safety with growth and/or a solid dividend yield is back in fashion in the market.
You may have your favorites among this group. At the moment mine is CVS Caremark. Read more
Losers and 5 winners from health care “reform”–and why we’ll be fighting over who pays for a decade
We know what the health care reform legislation due today for a vote in the Senate Finance Committee will cost: $829 billion over ten years.
We know that it will extend coverage to 94% of all Americans, up from 83% now.
And, thanks to the blessings of the Congressional Budget Office we even know that it will pass that committee. And, startlingly for those of us who winced through the August town hall meetings that roasted members of Congress, we even know that something like the committee bill, or stronger, is going to pass Congress.
What you and I as investors now want to know is what stocks are going to make money from health care reform legislation. I think the best way to answer that question is to apply the economics of “externalities” that I explained in my October 6 post http://jubakpicks.com/2009/10/06/capitalism-could-still-get-a-stem-to-stern-overhaul-to-keep-score-in-the-revolution-track-something-economists-call-externalities/
Hope you didn’t think I’d spent all those words building a tool that I wasn’t going to use for stock picking.
The answers are surprising. Read more
