However hard the market slams a stock, there's always the chance it'll come bouncing right back. We'll consult our Motley Fool CAPS community to find shares on the rebound, examining one specific sector of the economy in search of companies with rising CAPS ratings.
There are 126 stocks listed under "retail" in the CAPS' screener, of which more than a handful carries well-respected four- and five-star ratings. Those accolades mean our 180,000 CAPS members are confident that these stocks will beat the market in the months ahead. Let's see what members are saying about the ones below:
CAPS Rating Today
52-Wk Price Change
Estimated 5-Year Growth Rate
CVS Caremark (NYS: CVS)
Price Smart (NAS: PSMT)
Source: Motley Fool CAPS
International and financial worries still grip the market, of course, but with the S&P 500 rising less than 3% over the last 12 months, it may be surprising to learn that with a weak economy the CAPS retail stocks fared better, rising over 8% in that same time span. So let's take a closer look at why investors think these other companies won't be jumping from the frying pan into the fire now that the markets are roiled again.
A sporting chance
There was always the hope amongst Walgreen (NYS: WAG) investors that its squabble with ExpressScripts would be patched up sooner rather than later, but that ship seems to have sailed. The pharmacy operator reported same store sales fell 7.9% in January without the benefits manager, which accounted for almost 11% of prescriptions filled in 2011.
Although rival pharmacy Rite-Aid (NYS: RAD) will pick up some of the business (comps were up 2.2% in January), the real winner is CVS Caremark, already the 800-pound gorilla in the business and with its expansive network of stores, Motley Fool blogger Chad Henage sees it as having the most to gain from the divorce.
I'm sure that there will be some Express Scripts members who will go to other pharmacies, but in large part I'm willing to bet that CVS will be their next stop. With over 7,000 stores in 41 states, CVS has the kind of market coverage that these jilted customers want.
CVS is also the largest pharmacy benefits in the country and even the proposed marriage of ExpressScripts and Medco Health Solutions would only give the combined rival one-third of the market. With lots of opposition mounting to the union, the assault on its preeminent position seems weak.
Add CVS to the Fool's free portfolio tracker and let us know on the CVS Caremark CAPS page or in the comments section below whether you think its got the prescription for greater growth.
It would appear Latin American warehouse-club operator PriceSmart will have to fall lower before it can bounce higher. Even after the drubbing it took following disappointing first-quarter results, it still trades at 32 times trailing earnings, a 20% premium compared to former parent Costco and nearly 60% higher than Wal-Mart (NYS: WMT) .
Margins are paper-thin for PriceSmart, which seems to be part of a conscious effort to establish itself as the first-mover warehouse brand in Latin America. There's little competition to speak of in this space so according to the Fool's Brian Stoffel it passes on to the consumer whatever savings it squeezes out of suppliers.
But maybe it goes too far. Wal-Mart has a reputation of being able to get that blood out of a turnip, yet its operating and net margins exceed that of both its rivals. While the warehouse concept operates with tighter margins -- even Sam's Club has lower margins than Wal-Mart and it explains why Costco's margins are below even PriceSmart's -- if Wal-Mart expands its base of operations from Brazil, where it has dozens of clubs -- PriceSmart may feel even more pressure.
The current growth simply doesn't justify this huge valuation. I think 2012 will be no different than 2011, and some people will be forced to learn the same lessons all over again.
Add PriceSmart to your Watchlist and let us know in the comments section below whether you think it will be able to wield a club against its rivals.
The ball's in your court
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At the time thisarticle was published Fool contributorRich Dupreyholds no position in any company mentioned.Click hereto see his holdings and a short bio. The Motley Fool owns shares of Costco Wholesale and Wal-Mart Stores.Motley Fool newsletter serviceshave recommended buying shares of Costco Wholesale, Medco Health Solutions, Wal-Mart Stores, and PriceSmart.Motley Fool newsletter serviceshave also recommended creating a diagonal call position in Wal-Mart Stores. Try any of our Foolish newsletter servicesfree for 30 days. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.
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