Cramer explained that after years of lagging its peers, Rite Aid was finally able to turn itself around earlier this year. The company delivered monster earnings in April, making 13 cents a share when the analysts were expecting just 1 cent. Then it announced the refinancing of much of its high-interest debts at much more favorable rates. That news sent shares soaring but it also created a big problem, Cramer said.
The problem is valuation -- Rite Aid now trades at 12.9 times earnings, just a hair below that of CVS at 13.2 times and Walgreens (WAG) at 13.4 times earnings. CVS and Walgreens offer dividends. Rite Aid does not.
That's why Cramer said it's time to ring the register on Rite Aid and move into CVS, which not only is a better retailer but also benefits from Caremark, its pharmacy benefit management service. With millions more Americans set to have health insurance, Cramer said CVS will be the natural beneficiary on both sides of its business.
Least Valuable Players
For the next installment of his Miami versus San Antonio basketball-style shootout, Cramer shifted gears from the winning stocks from each city to the "least valuable players," the stocks investors need to avoid at all costs.From Miami, Cramer said the choice was easy: Carnival Cruises (CCL - Get Report), the ship operator that seems to be doing everything in its power to make sure no one ever takes a cruise again, Cramer quipped. He said less than a year after the company's disaster off the shores of Italy, another Carnival ship lost power and was set adrift for five days, leaving patrons most uncomfortable and in unsanitary conditions. While Carnival initially said the incident would only ding earnings by 10 cents a share, it was forced to later revise those numbers and cut full-year guidance. But San Antonio has its losers, too, noted Cramer, mainly Rackspace (RAX - Get Report), the data center operator that now finds itself in a commodity business fighting against the likes of Amazon.com (AMZN) and others. Cramer said that after reporting an abysmal quarter, shares fell from $75 to $60 a share but still trade at 40 times earnings. While both stocks are bad, Cramer said Rackspace wins the "least valuable" award because the company can do little to change its position in the marketplace.