CVS, Walgreen: How to Tell When a Stock is Being Dumped

CVS Caremark Corporation (CVS) is one of those companies that had it made. Its stores are organized and successful. The company sports great real estate locations, carries products we need and nurtures an eternal supply of faithful low-wage laborers. For the past year Goldman Sachs went on to predict the sky for the firm and check the chart - through November the stock had risen 30%. Then, there goes THA BOMB! Both Walgreen Company (WAG) and CVS collapsed close to 6% last week!

Goldman immediately responded:

This is a one-time bump in the road rather than a secular change in momentum; expect the shares to bounce back when 2008 EPS guidance is given on January 31.

Yes, we see, but we don’t buy it this time - the damage is done and most shareholders are holding the bags. In fact - check the distribution days on big volume - could it be that big institutions like Goldman were selling? You had no place being in the stock at that time. Long-term, I like the company, short term I don’t. It is a defensive stalwart after all. But who has a lifetime to wait on?

Goldman on CVS: The flu (not enough) and weather (too hot) were the problem. Since a drug retailer’s front-end mix is only about 20%-25% economy-sensitive the problem is not based on the economy slowing. Walgreen is not stealing share because their sales are a suspect. Expect a recovery in momentum in January, although it will not materialize until 1Q comps are reported in early May. Then we would know what the beast is really like. It is also worth noting that half of CVS’ earnings come from its PBM, which is not subject to the same kind of consumer vagaries as a retailer, and also management reaffirmed 4Q EPS guidance despite the December sales shortfall. These factors are very encouraging.

Rob Wallaston replies: The breakaway gap came on the biggest volume for the year, similar to another breakaway gap in October. The latter got filled. The present gap may fill too, but it will take some time and in the meanwhile it signals change in sentiment. I am not a buyer until it moves to $41. Long-term, feel free to add a little at these levels. Note: See in the last 2 weeks how sellers came at the $40 zone and pushed the price down? The moment the stock closed below the previous 4-day levels; the judgment was out and the stock was not able to stay above 10-day MA. The pattern was looking extremely bad. The last day to sell was Wednesday.

Comments

[SCRUzEXPERTS:]

I HAVE BEEN TRACKING THE EXPERTS LIKE GOLDMAN SACHS, JIM CRAMER , WALLASTON and ALL THE SCUM FOR COUPLE YEARS NOW. By their own admission they know a damn shit. At best they create confusion and fear and panic. why? the reason is say you invest in a hen (company), the hen lays eggs (dividend) the profit from the eggs is divided among the owners of the hen. Are you going to worry about the price of the hen every day and fret over it? Only a MORON FOLL WILL DO THAT. SO as long as a company is paying dividend and have good fundamentals you should sit back and relax. STOP PUTTING YOUR FINGER UP THE HEN EVERY MORNING LOOKING FOR THE EGG BECAUSE THE HEN WILL NOT LIKE IT AND YOU WILL BREAK THE EGG......THIS IS MY ADVICE FOR THOSE INVESTORS WHO STICK THEIR HEAD UNDER THE HEN'S POOP HOLE WAITING FOR THE EGG TO COME DOWN THE SHOOT......ONE MORE THING THE HEN DOES NOT CARE WHO OR WHAT THE EXPERTS THINK OR SAY . IT ONLY KNOWS WHEN TO LAY ITS EGGS, AND THE FARMER WILL GIVE IT FOOD AND TO HELL WITH THE EXPERTS M*THER F*CKERS.......LEARN FROM THE HEN AND DON'T BE A CHICKEN.....


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2008 Jan 09 11:21 PM

[borisa:]

psycho...

2008 Jan 10 04:24 PM

[reality_knocks:]

CVS was being sold off because it was looked at by many as a retail play and not a healthcare/defense play. Looks like the street is coming around. A little less charting voodoo and a little more fundamentals and patience is in order.

2008 Feb 03 04:22 AM