3 Reasons to Buy Rite Aid Today

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Historically, tumultuous times offer some of the best opportunities to unearth killer stocks, and the market's recent mess surely qualifies. And while investing in stocks crossing health care and retail today would be taboo to most, many investors think drugstore operator Rite Aid (NYSE: RAD  ) is the exception.

In our Motley Fool CAPS community, about 88% of the 924 investors rating the company are bullish, so there's no shortage of reasons why Rite Aid will thrive, three of which I've highlighted below.

But here at The Motley Fool, we're all for looking at both the good and bad sides of an investment. Once you're done with this article, you can read the case against the stock, weigh in with your own comments below, or rate Rite Aid yourself in CAPS.

1. Bouncing back
Shares of Rite Aid have fought their way back from mere pennies early last year, when many investors had also left stocks like Citigroup and Ford (NYSE: F  ) out in the garbage. But with a strong brand and an aging population creating a growing drug demand, some CAPS members think there still may be some juice left and like the odds of Rite Aid continuing its recovery.     

2. Making moves
Rite Aid has taken steps to improve its situation, including refinancing debt, slashing costs, and improving its liquidity in an attempt to shore up its finances. And with recent results from retailers like Home Depot (NYSE: HD  ) and Sears Holdings (Nasdaq: SHLD  ) suggesting the worst may be over, some investors think Rite Aid could benefit significantly if it can turn the corner in time to ride any forthcoming economic turnaround.    

3. Takeover target
After Walgreen (NYSE: WAG  ) recently agreed to acquire Duane Reade to boost its competitive stance, some CAPS members floated the idea of Rite Aid as a takeover candidate, an opinion recently echoed by a UBS analyst. While investing in buyout speculation can be risky, investors think the whole company or some of its stores could be a good addition to rivals such as Walgreen, CVS Caremark (NYSE: CVS  ) , or even Wal-Mart Stores (NYSE: WMT  ) .

To see details of what CAPS members are saying now about Rite Aid, just click on over to Motley Fool CAPS and have a look -- or add your own thoughts directly to this story in the comments box below.

The Motley Fool Stock Advisor service looks for companies with strong management poised to beat the market over the long haul. To see all the stocks that have helped Tom and David Gardner beat the market by 55 points on average, take a free 30-day trial.

Fool contributor Dave Mock has more than three reasons why he shouldn't be left alone with a box of Girl Scout Thin Mint cookies. He owns no shares of companies here. Home Depot and Wal-Mart Stores are Inside Value recommendations. Ford is a Stock Advisor choice. The Fool's disclosure policy is on a 3,000-calorie-a-day diet.

Read/Post Comments (3) | Recommend This Article (30)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On March 12, 2010, at 11:03 AM, caltex1nomad wrote:

    Why buy out Rite Aid when you can just wait till they go Belly-UP and buy them at the Fire Sale. They have way too much debt to be a buy-out candidate. Have you been in a Rite Aid store lately ? Empty shelves, crappy seasonal merchandise and the stores are filthy. The only good thing they have is Thrifty Ice Cream. Maybe CVS can buy Thrifty Ice Cream. I love the re-design CVS did on the old Long's Drugs here in CA. I liked it so much I bought the stock.

  • Report this Comment On April 07, 2010, at 10:21 AM, safesailor wrote:

    I think the new Rite Aid program "Wellness Plus" is going to be a game changer. It should start in about a week. I know the bad news and reduced outlook dont't look good but I think management is understating the effect that this program will have,

  • Report this Comment On July 10, 2010, at 6:15 AM, TheNetAdvisor wrote:

    Buy Rite Aid? Really?

    "88% of the 924 investors rating the company are bullish, so there's no shortage of reasons why Rite Aid why Rite Aid will thrive…"

    My friends, I think you are going to have 88% of 924 people who are going to be without money.

    Sure, I guess your risk is a buck a share, but statistically the odds are not only against you; fundamentally and technical the stock has been dead money, and one of the worst long term investments I have seen since 1985.

    How does one compare RAD with companies such as C, F, HD or SHLD?


    Why would anyone one take over a company that is losing money hand over fist with a balance sheet looking like a small version of the U.S. deficit, when they can just buy them for 10-30 cents on the dollar in bankruptcy, wipe out most to all of that debt, and take the equity on the cheap?

    The same analogy was used with Enron, WorldCom, and about 40+ other companies I can cite.

    Wal-Mart Takeover?

    When has Wal-Mart EVER felt threatened, where they had to buyout someone in order to maintain their competitive advantage? All WMT has to do is open a store, and all the mom and pop competitors go under. I’ll take odds all day that WMT will not even buy RAD in bankruptcy.

    CVS already bought Longs, so they don’t need RAD. There may be huge anti-trust issues if CVS takes RAD over in a Chapter 11 or outside of one. Walgreens (WAG) might be an interesting player for RAD, but again maybe in a bankruptcy.

    For a takeover outside of bankruptcy, I'll take the other side of that trade.

    Read further: 07-10-2010

    "Will rite aid doomed to go bankrupt any time soon or will they recover?"

    --- Finance & Risk Management Consultant

    --- 21 years in the markets

    --- Detailed bio and other work:

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