CVS Caremark Corp (CVS)

CVS is the largest drugstore chain in the United States with 6200 stores as on December 2006. In terms of market presence it is ranked either 1st or 2nd in all the markets in which it operates. Apart from prescription drugs the company also sells over the counter drugs, beauty and cosmetic products, film and photo finishing services, seasonal merchandise under the broad category of “front store products” through its retail pharmacy arm. The company also provides managed care and products to customers who need more complex and expensive drug therapies through its Pharmacy Benefit Management arm named “Pharma Care management “.

The health care industry is one of the world’s fastest growing industries and in the US it forms about 15.3% of GDP. CVS controls approximately 14% of this market making it the clear leader. For the past two years the company has been growing organically by opening new stores and relocating existing ones and inorganically by acquiring Eckerd Corporation thus adding an extra 1200 stores. These actions have increased the income growth rate by 20% and this has petered out onto other financial indicators.

The inorganic growth of the company has continued with the acquisition of 700 stand-alone drugstores of Sav-on and Osco as well as the distribution centre based in California there by increasing its penetration. The company is in the final stages of merging its Pharmacy Business Management (PBM) arm with Caremark the largest PBM in the market. The average household expenditure on pharma products is set to rise with more and more aging baby-boomer relying on prescription drugs as a first line of defense against diseases. Added to that is the general scenario of a rise in chronic diseases. These factors are acting in favour of the company and will propel the stock to greater heights.

Ugly stores compared to bright, inviting direct-competitor Walgreens.

As more people need meds, Walgreens will enjoy increased traffic. As it does, people will decide to pick up some of its wide selection of goods.

CVS doesn't seem to care about anything except getting you on your way with a bottle of pills.

CVS is a well-run retail pharmacy chain. Great brand recognition, ubiquitous presence, good customer service experience (from my viewpoint, at least).

But the biggest reason for a long-term outperform call is -- oh yes, you guessed it -- the Baby Boomer thesis! Sorry for dragging out that old cliche, but it is true. CVS should capture a lot of mindshare from these aging folks looking to satisfy their retail health needs.

I would own this company for the next 10 years. Solid growth, good management and aging population surely helps. Walmart can sell cheap knock offs, but remember the money is in new blockbuster drugs and not generic ones.

Even with all stock price waiting on a deal that some say will never happen, CVS is a climbing stock and seems to continue to overcome the concerns. If the stock merges, the price will shoot higher. If the merge doesn't go through, the stock will be allowed to raise on it's own merit.

CVS is quickly becoming the more friendly, more liked pharmacy/convenience store. With Wal-greens becoming more of a pain, and more expensive for pharmaceutical drugs, I expect to see CVS continue to take advantage of this, and continue to grow.

Is CVS really worth 20% less than it was yesterday?

No.

So far it looks like I may be wrong.

Walmart's entry into generics caused CVS and other drugstores to suffer. Definitely overhyped until Walmart expands the program nationwide and more drugs are covered. That was my thinking...*Doke*

CVS has been offering stock buy-out options to all of its employees. I think they may know something we don't.

This Caremark merger may be bigger than initially expected. I'm riding this one for at least a year.

Trading at around 14x next years earnings. Low end of historical range.
Is a staple stock - not very sensitive to a decline in economic activity.
The negative sentiment re wall mart, the democrats etc is (in my opinion) overdone.

CVS may be the largest drug chain, but not the best. Walgreen's has that distinction. CVS is increasing size thru debt financing, WAG is virtually debt-free. Once Wag is finished it's rapid expansion, shareholders will reap their rewards. CVS is the Avis of drug chains. Hey, exactly where is Avis today?

INVESTMENT. I'm long on CVS. Good long term prospects for consumer drugs, escpecially with aging boomers. Recently I divested my holding in WAG and picked up CVS. Caremark gives CVS additional reach and access to lower cost distribution channels (e.g., mail)

Technically speaking, this stock seems like it's itching to move higher, and after pushing through $30 today, if I had to choose between buying and selling, I'd be a buyer. The market seems to be changing its mind very quickly about the recent merger news, which was initially received negatively. (Disc: I don't own CVS and I'm not a fan of drugs, but if I had to choose a drug retailer, it would probably be this one.)

Holiday season coming into play.

CVS is a marketing juggernaut....from ABC's Extreme Makeover to St. Jude and ALS contribution campaigns...known for service and having the largest participation in a customer loyalty card...one that actually gives back to the customer every quarter...EXTRABUCKS...new stores popping up everywhere...new acquistions in the Midwest and West Coast within the past two years(Sav-On and Osco)...and huge growth in the Southeast and Southwest within the past four(Eckerds)...passing Walgreens in the slow-lane....with Caremark on it's back....

recent and Future acquistions

Shares depressed too much due to WalMart's entry. The market has misjudged this one as most of the population is Urban in the US, and CVS is an Urban format store. WalMart is a suburban/rural format store. Consumers will not spend $5-$10 on gas to go to WalMart for Tampx/Tylenol or prescription Claritin for $4 when they have the convenience of walking or a short commute on the way home from work at CVS and can pay the same net price. CVS is also rolling out the in store Registered Nurse program which is excellent for convenience. Convenience is KING in the medical industry. And they have the second largest distribution chain in the country to catch the baby boom retirement wave/immigrants with large families demographic. Definitely buy and hold long term.

Great entry point on this recession resistant foundation stock. Embracing the new paradigm of adjacent clinics will pay off for this company as well.

CVS has a business plan aimed to lure female customers into the store and keep them coming back. I think its working. With a P/E of just over 15, there is a lot of value here. Acceptable debt levels and good year over year earnings growth. I would buy this stock in real life, but they don't have any stores near me, so I can't keep an eye on them.