NEW YORK (TheStreet) -- The signing into law of the most expansive social legislation in decades may have paved the path to prosperity for some retailers.
To be more specific, those who provide prescription drugs and in-store health clinics are likely to be the real winners. In this category,
are likely to reap the most benefits.
Walgreen is the largest U.S. drugstore chain and currently runs nearly 359 in-store clinics. These clinics that are being run focus primarily on acute care, treating ailments such as earaches and testing for sore throats. Additionally, a spokesperson for the drugstore chain said Walgreen expects to significantly increase the number of in-store clinics it offers in the immediate future.
Another reason Walgreen is attractive is the effort that it is making towards prevention and control of diseases. Recently, Walgreen announced a partnership with
and the YMCA which incentivizes pharmacists and life coaches to prevent and control diabetes. Lastly, the drugstore is seeing an increase in foot traffic, indicated by the 6% increase in filled prescriptions it has witnessed this year, surpassing the industry average. Walgreen closed at $36.81 on Tuesday.
CVS is the nation's largest operator of in-store clinics, called MinuteClinics, with nearly 500 in 25 states. It is expected to nearly double this number over the next five years in response to the passage of the Patient Protection and Affordable Care Act. This expansion is expected to significantly increase foot traffic in stores and increases revenue driven primarily by impulse shopping.
Additionally, CVS's clinics have broadened their services from just acute care to treat diabetes, high blood pressure and asthma and are expected to offer services geared toward patients with chronic illnesses. These clinics are aiming at offering services that primary-care physicians offer in a neighborhood shop. CVS closed at $37.18 on Tuesday.
The world's largest retailer is also a provider of in-store health clinics and expanding these services is a major focus of the company. Additionally, Wal-Mart offers other health-related services like vision care that aren't found in the other drugstore chains and is expected to expand these services as well.
Some other factors that are likely to bolster the attractiveness of these three companies is the aging U.S. population. According to the Social Security Administration, it is expected that 80 million baby boomers will become eligible for Social Security benefits including Medicare over the next 20 years, meaning that the number of prescription drugs being filled and re-filled will likely multiply. It is a proven fact that as a person ages, he consumes more medication. Wal-Mart closed at $54.72 on Tuesday.
A good way to gain exposure to all three of these stocks is through the following:
- Retail HOLDRs (RTH) - Get Report, which allocates 20% of its assets to Wal-Mart, 6.9% to Walgreen and 4.9% to CVS. RTH closed at $104.34 on Tuesday.
- Consumer Staples Select Sector SPDR (XLP) - Get Report, which allocates 10.3% of its assets to Wal-Mart, 4.7% to CVS and 3.3% to Walgreen. XLP closed at $28.04 on Tuesday.
Although an opportunity seems to exist in retail drugstores, it is equally important to consider the inherent risks involved with investing in equities. To help mitigate these risks, the use of an exit strategy which identifies price points at which an upward trend could come to an end is important.
According to the latest data at
, an upward trend in which these equities could come to an end is at the following price points: WAG at $35.79; CVS at $35.08; WMT at $54.15; RTH at $100.87; XLP at $27.64.
Written by Kevin Grewal in Laguna Niguel, Calif.
At the time of publication, Grewal had no positions in the securities mentioned.
Kevin Grewal serves as the editorial director and research analyst at The ETF Institute, which is the only independent organization providing financial professionals with certification, education, and training pertaining to exchange-traded funds (ETFs). Additionally, he serves as the editorial director at SmartStops.net where he focuses on mitigating risks and implementing exit strategies to preserve equity. Prior to this, Grewal was an analyst at a small hedge fund where he constructed portfolios dealing with stock lending, exchange-traded funds, arbitrage mechanisms and alternative investments. He is an expert at dealing with ETFs and holds a bachelor's degree from the University of California along with a MBA from the California State University, Fullerton.