Last up is Cardinal Health (CAH), a firm that's made an attractive business out of being the middleman for pharmaceuticals and medical devices. As a distributor, Cardinal packages, inventories, and handles logistics for drugs, taking the burden off of its suppliers and its customers. Cardinal does that through scale. Because of the volume of drugs it handles, it can distribute them more efficiently than most of the organizations on either side of the transaction.
But that middleman status does come with some risks. If either side of the deal (pharmaceuticals, medical supply makers or major pharmacies) decide that profitability looks too attractive for firms such as CAH, they can always opt to fulfill that role in-house. A concentrated customer list at Cardinal means that a lot of the firm's business depends on renewing a handful of contracts; the Express Scripts (ESRX) contract loss last year was a high profile reminder of that fact. Losing one of the firm's major retail pharmacy clients would be a big problem for the firm, and investors should be aware of that.Even so, Cardinal looks well positioned going into 2013. As an aging population continues to require more drugs, Cardinal should have a strong tailwind lapping at its back. Now, with rising analyst sentiment coming into CAH this week, we're betting on shares. To see all of this week's Rocket Stocks in action, check out the Rocket Stocks portfolio at Stockpickr.-- Written by Jonas Elmerraji in Baltimore.
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