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Thursday, March 26, 2009

WMT, WAG, CERN, INTC, SPWRA

S&P 500: +18.98 (+2.33%)


Wal-Mart Stores (WMT) +2.09% and Walgreen (WAG) -1.01%
This Bloomberg story helped lift Wal-Mart while sending Walgreen lower. Expanding its prescription program beyond Caterpillar is definitely a positive step for Wal-Mart in its attempt to grab market share in the prescription industry. The article seems to imply that Walgreen has nothing comparable to the program that Wal-Mart is expanding beyond its partnership with Caterpillar, which is not really true. Walgreen has started to grow a network of pharmacies, in-store clinics and company health centers that it markets to corporate and government employers nationwide.

Walgreen is a leader in what is generally viewed as a lucrative industry. As I mentioned earlier this week, Walgreen’s prescription sales are significantly outpacing the rest of the industry. Although nobody can match Wal-Mart’s scale, Walgreen’s success is derived from convenience and customer experience. Walgreen has used its free-standing stores in prime locations as the backbone of their growth strategy for over the past decade – people will fill prescriptions where it is most convenient. While Wal-Mart has pharmacies in its stores all across the country, it is a much bigger hassle to deal with the vastness of the store and its operations.

Don’t get me wrong, Wal-Mart is a powerhouse whose economies of scale pose a threat for all industries in which they operate. My point is that the industry has always been highly competitive and each player brings a different value proposition to consumers.


Cerner (CERN) -3.86%
The Wall Street Journal ran this article today examining the costs to U.S. hospitals that are adopting electronic records. The information in the article is nothing new, so it may be more appropriate to attribute today’s decline with the fact that investors are buying up shares of beaten-down companies – something Cerner is not.

Shares of Cerner, a leading supplier of health care IT solutions, have risen 14.8 percent YTD and over 40 percent since Nov. 20 on the expectations that Obama’s health care initiatives will increase business. Cerner should have an edge over competitors since Obama appointed Cerner board member Nancy-Ann DeParle to serve as director of the White House office for Health Reform.

Cerner’s software platform differentiates itself by providing information to all entities involved (patients, hospitals, pharmacies, laboratories, etc), whereas competing products provide information to some of the entities involved. This could prove to be a big advantage as well since Obama is calling for increased transparency within the health care industry.


SunPower Corp (SPWRA) +10.98%
China introduced a subsidy to promote the use of alternative energy, sending SunPower and other solar companies soaring. Solar energy companies have seen renewed enthusiasm as project financing begins to improve in the U.S. and as the Chinese government reiterates its support for the industry.

The U.S. Energy Department has made more than $2.6 billion available to states through its Energy Efficiency and Conservation Block Grant program, part of the federal stimulus package.


Intel (INTC) +5.89%
Bloomberg reports that chipmakers advanced after a benchmark for dynamic random access memory chips jumped 14 percent and Goldman Sachs Group said the price surge will be “likely sustainable” because of a shortage of supply.

Intel also filed to offer $1 billion in stock for acquisitions.


Quick Hits

Peter Lazaroff, Junior Analyst

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