Usually a big M&A deal benefits the companies merging - it creates syngeries - but there's a merger happening in health care that may be just a beneficial to a rival.
As you may know, Express Scripts announced last week it would buy Medco Health Solutions , and if the deal goes through, the new company will become the biggest pharmacy benefits firm in the country.
And Fast trader Stephen Weiss thinks that’s good news for CVS Caremark.
Rather than make business more challenging for CVS, Weiss says the most important part of the deal will mean less competitive pricing -- and that's good for CVS.
“I think that CVS is in better position now than they have been before the merger,” he said. “I like the stock quite a bit, it’s delivered. It’s a good story and I like the option of being able to go into the pharmacy instead of only getting it by mail order.”
And from what we can tell, CEO Larry Merlo shares the opinion. In a live interview on “Halftime Report,” the CVS CEO largely skirted the question only saying, “The marketplace has always been competitive and I think that will continue as we move into the future,” was his comment.
Also noteworthy, Merlo denied market chatter that the Express Scripts-Medco deal would pressure CVS Caremark to split.
“We have no plans to break up the company,” he said. “As a matter of fact, we’re having a very successful selling season … And we’re very excited about the prospects the future brings for us.”
The CEO was in Washington Wednesday to testify in front of the Senate Finance Committee about reforming the US tax code. Merlo said he was encouraged by the level of interest by the lawmakers.
“We’re now in an environment where we need reform to make the US more competitive in foreign markets,” he said.
So how should you trade it?
Like Weiss, Fast trader Steve Cortes is bullish CVS. He thinks the consumer is cautious these days, and because of that, the space to be in is consumer staples.
But traders Brian Kelly and Zach Karabell aren’t terribly enthusiastic. Kelly thinks margins will come under pressure and Karabell sees more downside than upside.
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Trader disclosure: On July 27, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Cortes owns U.S. Treasuries; Cortes is short (LVS); Cortes is short (LULU); Cortes is short (IYT); Cortes is short the Euro; Cortes is short Copper; Cortes is short Corn; Karabell owns (DOW); Karabell owns (GOOG); Karabell owns (SBUX); Weiss owns (COP); Weiss owns (DVN); Weiss owns (AKAM); Weiss owns (SLV); Weiss owns (UGL); Weiss owns (CAT); Weiss owns (QCOM); Weiss owns (TWM); Weiss owns (BTU)
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