Tag - Wag

"Healthcare-related stocks have been trading up and down based on the latest rumor of how the Obama medical plan might be implemented," observes Glenn Rogers.

The contributing editor to Gordon Pape's Internet Wealth Builder asks, "How can we benefit from Obama-Care?" Here, the advisor looks at Walgreen (NYSE: WAG), the largest drugstore chain in the United States."

"The reason is that these companies operate convenient low-cost walk-in clinics often staffed by nurse practitioners, midwives, and other medical professionals below the rank of M.D.

"These walk-in clinics are attractive for state governments in that they free up emergency rooms and hospitals and provide basic services at much lower costs than the offices of fully accredited doctors.

"Of course, when people come in to seek medical care they often go directly from the clinic to the store's in-house pharmacy to buy over-the-counter aids and/or have prescriptions filled.

"So having clinics on site has the effect of increasing revenues from the pharmaceutical side of the business. But Walgreens benefits in the same way, plus it earns extra profits from the clinics themselves.

"The reason I like Walgreens over Caremark or Target is that they have 346 in-store clinics and more than 370 healthcare centres throughout the U.S. The store sites have treated more than 1.5 million patients since 2005.

"CVS Caremark is second with more than 500 in-store clinics but Target is barely in the game with only 22 clinics in Minnesota and six in Maryland. So based on scale, Walgreens has the best footprint and of all the drugstore companies they appear to be the best run.

"Walgreen recently raised its dividend for the 34th year in a row. In fact, they boosted it by 22%, from 11.25c a share per quarter to 13.75c (55c annually), for a 1.8% yield.

"Given that many S&P companies have cut or even suspended their dividends over the past 18 months, finding one that's actually going up was a real pleasure. This move will put $99.2 million in the hands of investors.

"That said, they missed their earnings estimates for their fiscal third quarter, which ended in May. Earnings came in at 53c a share which compared to analysts' estimates of 56c and last year's 58c. However, revenue was up 8% to $16.2 billion with same-store sales increasing 2.8%.

"That resulted in a big increase in free cash flow, to $1.8 billion for the first three quarters of fiscal 2009. That was up $800 million from the comparable period in 2008, hence their ability to raise the dividend.

"The other reason I like drugstores generally is that they don't really care if they sell generic or non-generic drugs. As the population continues to age, our need for various forms of remedies is likely to continue to increase.

"There will probably be upward price pressure from suppliers but big companies like Walgreens can push back and would likely win that kind of margin battle.

"Certainly, as consumers continue to be challenged by the on-going recession, all retailers are suspect to some degree but the food and drugstore segments appear to be the least vulnerable. Buy with a price target of $32."
 

Small-cap stocks pushed lower, pressured by concerns about corporate profits, worries about late holiday spending results and ongoing jitters about the economy and the credit crisis. Losses were limited by optimism about stimulus plans for 2009 and persistent bargain hunting from market watchers who believe the bottom has already been made. At 9:54 a.m. ET, the Russell 2000 (NYSE:IWM) was down 6.42, or 1.32%, at 479.84.

Some early enthusiasm was tied to news that President-elect Obama will ramp up the job-creation goal of his stimulus package to 3 million new jobs from 2.5 million. The market is already hoping that Obama’s stimulus plans will help spark an economic recovery as 2009 progresses.

Walgreens (NYSE:WAG) posted a smaller-than-expected quarterly profit and announced plans to trim new store opening goals. WAG shares were off 4.1% shortly after the opening. It’s still early to get a good picture for shopping results in the United States over this past weekend, but with winter storms in the Midwest and Northeast, it might be difficult for retailers to come up with great results. Early this morning, the S&P Retail Index was down 0.5%.

Crude oil prices were choppy into the stock market open, but copper prices rose 4% in London trading, bolstered by a dip in the U.S. dollar against the euro and by news of a big jump in China imports during November. The greenback remained down against the euro, which could underpin various commodity markets today.

Citigroup analysts said that they remain underweight on utilities, autos and real estate investment trusts. Carmakers were a source of weakness for overseas markets . . .

The way SXC Health Solutions (Nasdaq:SXCI) sees it, even through current market malaise, the company is standing firm with its two corporate feet firmly planted in two complementary arenas: it's providing pharmacy benefits management services and developing the technology engine needed to keep costs under control.

Bringing down health-care costs remains a hot-button issue, as the baby boomers reach retirement age, Medicaid and Medicare grow, and drug costs continue to rise.

Pharmacy benefits management is one course of action to rein in costs, and one of growing importance: witness the CVS (NYSE:CVS) acquisition of PBM giant CaremarkRx in a $21 billion deal last year.

SXC Health Solutions, formerly known as Systems Xcellence, is a niche player in the benefits marketplace, with a market cap of $364 million. Headquartered outside Chicago, SXC Healthís stock has traded on Nasdaq since a 2006 public offering, and with Canadian operations, it's also listed on the Toronto Stock Exchange.

Niche players can be big players in this $4.5 billion market: SXC says one in four 1-in-4 U.S. managed-pharmacy benefit transactions last year touched its technology. Clients include unions, universities and businesses, along with federal, local, state or provincial governments. SXC says recurring contracts account for more than 80% of revenue. In 2007, transactions increased 30% to 404 million.

SXC Health's share price has risen 11.6% in the past three months. Analysts generally have a favorable opinion about the performance going forward: of the 16 analysts polled by Thomson Reuters, three rate it a "strong buy," six call it a "buy," . . .

The Russell 2000 (NYSE:IWM) declined as news of an emergency sale of Bear Stearns spread fears of financial turmoil. The small-cap index fell 12.42 points, or 1.87%, to 650.48. The Dow Jones Industrial Average (INDU) gained 21.16 points, or 0.18%, to 11,972.25.

On a year-to-date basis, the Russell 2000 has shed 15.08%, while the Dow is down 9.74% and the S&P 500 has retreated 13.06%.

Stocks small and large opened significantly lower on news that investment bank JPMorgan Chase & Co. (NYSE:JPM) has purchased Bear Stearns (NYSE:BSC) for just $2 per share, according to an announcement on Sunday.

The buyout was unprecedented, as the U.S. Federal Reserve gave JPMorgan $30 billion in special financing to complete the deal and prevent further financial turmoil. Shares of Bear Stearns were worth over $170 a year ago, but the company was heavily involved in securities backed by subprime mortgages and was dealt a lethal blow by the housing downturn.

The Fed also lowered its discount rate, the rate at which it lends funds to commercial banks, to 3.25% from 3.50%. The central bank will hold a regularly scheduled policy meeting on Tuesday, with investors expecting a steep cut in its target federal funds rate.

As Internet mania soared in the late 1990s, so did the stocks of companies that promised to turn brick and mortar stores into online e-tailers. None of them saw the ground until they hit it in the dot-com crash.

Art Technology Group, Inc. (Nasdaq: ARTG), a Cambridge, Mass., seller of e-commerce software, is one company that imitated Icarus, the mythological figure who soared high before plunging back to earth after heat from the sun melted his wings, and the result was not pretty. Founded in 1991, the company went public in July 1999 at $6 per share and peaked at $125 a year later after splitting 2:1 in March. Then the meltdown began, and revenue dropped from $63 million in the fourth quarter of 2000 to a low of about $14 million in the second quarter of 2002. By that time the stock was trading for less than $1.

Art Technology Group, commonly referred to as ARTG, is still alive, although the stock is hovering much closer to the ground these days having closed Thursday at $4.17. Still, that’s nearly double the price it commanded a year ago. Several Wall Street analysts believe the company has successfully restructured and is ready to make smaller yet impressive gains over the next few years.

ARTG has a strong lineup of software and services to create everything from online shopping carts, customer service systems and marketing programs to systems that understand natural language queries and collect data about individual buying and site surfing patterns. Its big advantage is its ability to tailor searches and other features to individuals based on their past actions.

“ARTG has one of the most, if not the most, robust e-commerce solutions around,” says Paul Kaump at Northland Securities.