Face-Off on Stocks: Walgreen, CVS, Rite Aid [Video]

Not everyone is happy about the mild start to the cold-and-flu season. The nation's drugstore chains, already under pricing pressure from Walmart (WMT) and each other, would be happier if the rest of us had coughs and sniffles.

As it is, the country's three biggest drugstore chains have had to bear down on controlling costs and reining in margin-busting discounts because revenue growth has been so hard to come by. (And when it does, it tends toward gains of the single-digit-percentage variety.)

Perhaps that's why shares in Walgreen (WAG), CVS Caremark (CVS) and Rite Aid (RAD) have been so disappointing in 2010. Whether that makes them cheap plays for 2011 -- or set to greatly underperform the broader market yet again -- is, of course, a matter of debate. For the bull and bear cases on Walgreen, CVS and Rite Aid, see Face-Off on Stocks above.

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This was an investment video, not an editorial on the "rich getting richer and the poor getting poorer." None of these three stocks are where I would put my money, if I had a choice.

My Investools software doesn't give any of them really good scores, especially Wal Mart. Walgreens and CVS are an Analylist Rating "buy," but neither of them have that great "Phase one/two" scores. Maybe, put some money on Walgreens, but put your trailing stop losses in rather tight to protect yourself. It just had a good size jump to about $39. It just jumped above it's upper Bollinger Band and it may be ready for a retracement in the short term. The RSI looks like its a little overbought too. Wait a few more days if you really want something here.

I'm looking in the Jewelery & Silverware and Coal Industry for my next week picks, not the Retail Drug sector.

For full disclosure, I'm not "rich." I'm 49, my house is paid for, my kids are out of private college and I have about $240K in the stock market. 2010 was a good year for investing for those who just do their homework.

December 25 2010 at 2:32 AM Report abuse rate up rate down Reply
Robert & Lisa

The rich keep getting richer and the middle class and the poor keep getting poorer. The last two years more so than ever. Still think Obama and the corrupt Demoncrat thugs are the answer? There is a reason the elite, rich man, George Soros and his corrupt, evil, rich cohorts are supporting the unions and the corrupt Demoncrat politicians. After being brainwashed by our Socialist Government Educational system, are you smart enough to understand why?

December 24 2010 at 8:31 AM Report abuse +2 rate up rate down Reply

Pressure tactics and low prices without individual attention? Where may a consumer go to have their prescriptions filled and to find trusted advise that works with the medical follow-up.

December 23 2010 at 10:05 PM Report abuse rate up rate down Reply

One of the most reliable sources of trusted information is within an affiliated Pharmacist and the local resources that are readily available. Such one-on-one communication is not available at any local Walmart. It is not about bashing, but it is about affiliated Pharmacy personell that connects customers problematic situations with realistic and honest caring solutions that drives trust. Affiliated Pharmacy chains should form their own sharing defenses to counter the "All i want to hear is the register sounding off with a Cha-Ching." A big turn around in affiliated Pharmacies are expected. Hang in there people.

December 23 2010 at 9:51 PM Report abuse rate up rate down Reply

No wonder they are having trouble. One item is $4.00 more at CVS than Publix. They have specials and are alwsys out of the item.

December 23 2010 at 4:36 PM Report abuse rate up rate down Reply

Stay away from CVS! They treat their store management staff with borderline illegal tactics. The NLRB should pay attention to what is going on. The merger with Caremark has not gone well so the brick and morter stores must pay with lower wages, reduced staffing and terrible working conditions for salaried management.

December 23 2010 at 3:01 PM Report abuse +1 rate up rate down Reply
1 reply to dukeducals's comment

Thats B.S. I know personally that Border line Illegal tactics that you speak of at CVS does not exist. You must be a begrudged ex-employee. My wife was hired as a D.M. and is paid more than many if not all of her peers. Furthermore, she has trained in several different stores that unfortunately have lazy people that think they should work when they feel like working. CVS like many other corporations are beholden to its share holders. Managements job is to make the share holders money.

December 23 2010 at 4:32 PM Report abuse rate up rate down Reply

Excellent ananlysis, from tsikov. I don't have the expertise to give a business case, but my eyes can see what they see. I've been shopping at Walgreens, forever. Lately, they are running 2 registers in front and diverting customers to cosmetics, to check out. Lines were getting way too long, in front. Lots of seniors are doing one-stop shopping, at WAG. The pharmacy is busy, as always. This sounds pretty stupid, but it's true. There is a surge in business and they have everything in place, under one roof. Oh, the manger of my local store said that their store is booming, with respect to others... I shop several stores and the others seem to be doing well too, though. He says that their numbers are superior and I can read his attitude. This is one very pleased manager! So there's my unscientific, unsolicited and slightly-biased opinion. I am holding 200 shares of WAG... If I could afford to buy, I would no doubt increase my holdings by 50%. So, I am HOLDing for the intermediate to long-term. Peter Lynch often said to, "look at what's right under your nose," referring to his wife's recommendation of a company who sold women's hosery in plastic eggs... He wisely listened to his wife and it turned out to be one of his best purchases, for the Magellan Fund, I believe. Anyway, what I'm saying is that even a person like me, can see, when something is running on all 8-cylinders. Thank you, Walgeenss, for hanging in there through the lean times, over the past few years!

December 23 2010 at 12:18 AM Report abuse +3 rate up rate down Reply

Probably the wrong day to bet against WAG. They hit the earnings out of the park on cost control. I think they will continue to be the leader for years to come. This is not a get rich quick stock, but a safe bet that will undoubtedly provide good returns in good times, and not kill your portfolio in bad times.

Rite Aid... well, I agree that it is not a bad place to put a small wager. They have the deck stacked against them, given that they do not have the capital available to do meaningful upgrades. They are scrappy operators, though. If the economy turns around, the stock could easily triple in a year. If the economy remains weak, they will limp along and do nothing for a long long time. The wild card is that they could end up selling a significant chunk of the chain to competitors, or even the whole thing to Wal-mart. That could result a huge payday, but there is no guarantee it will happen.

CVS is my least favorite of the crowd. I don't think they will ever get the PBM side untangled, mainly becuase many customers do not feel comfortable dealing with a hybrid provider. Given that the federal government has lingering questions about the same, the concerns appear to be valid. Furthermore, given the complexity of their business, I don't think anyone can analyze the numbers. There is so much cross-subsidization that they can easily make the numbers however they want them to read. Analysts have given this company darling status for quite some time, but I think the shine is off.

December 22 2010 at 10:00 PM Report abuse +3 rate up rate down Reply