Same Old Same-Store Story

Pick of the litter or adorable runt? That's the decision you often have to make in the stock market, and although I like to get stocks on the cheap, I also believe that investors will nearly always do better buying the best company in any given space. In other words, leave the runt behind.

The September sales results from drug stores Rite Aid (NYSE: RAD) and Walgreen (NYSE: WAG) make it clear, once again, why this picture looks the way it does.

For the month, Rite Aid squeaked out a slim 1.1% same-store sales increase, ahead of a slimmer 0.4% increase in total sales. The difference is due to the ongoing store closings, which amounted to 38 fewer stores this year.

Walgreen, by comparison, posted same-store sales gains of 7.7% and total sales up 10.9%. That's good news, because increased sales bring better profit firepower at Walgreen; it's got the best margins in the game.

That said, I have a hard time getting too enthusiastic about either of these companies' shares. I believe Rite Aid will continue to be mediocre. I gave the firm a thorough look a few months back and found little to recommend it. Walgreen shares are tough to love because they're never cheap, trading at a P/E ratio of more than 30 for much of the recent past.

What's an interested Fool to do if he's just got to have a piece of this space? How about a look at underloved competitor CVS (NYSE: CVS)? It has traded at a much lower multiple than Walgreen -- teens and 20s -- over that period, while showing more lackluster improvements in profits. But here's another picture that shows you how the market can treat companies that rise above mediocre expectations. Often, those companies treat investors better than the ones that simply continue to jump the very high bar that they, and the market, have set.

For related Foolishness:

• It was all green for Walgreen last month.
• Stephen Simpson was waiting for Walgreen.
• Rite Aid's not right yet.
• Discover Walgreen's prescription for success.

Seth Jayson keeps his eyes peeled for the cheapies, but at the time of publication, he had no positions in any company mentioned here. View his stock holdings and Fool profile here. Fool rules are here.