Weekly Stock Pick

Scanning the charts this early Monday morning after the insane market action last week with the market tanking all week, then the big dead cat bounce rally on Friday, I was wondering what would pop on the radar screen for a buy or sell this week. Actually not much of anything looked very interesting. Couple of crappy short sells, and no decent long candidates of my liking to speak of. No more naked shorting rule as been implemented by the SEC now, so there’s no more straight out short-selling for the time being. Nonetheless, the best thing I can come up this week is a sell on a big medical management company that has a decent 3:1 plus reward risk ratio to it. My sell candidate is Express Scripts.

Express Scripts Company Profile from their website.

Founded in 1986 and never owned by a drug manufacturer, Express Scripts aligns its interests with those of plan sponsors and their members. This legacy of independence means that the company’s programs and original research on the pharmacy benefit serve its clients.

Express Scripts drives to lowest net cost by enabling better health and value at the consumer level. As evidence, Express Scripts’ generic dispensing rate leads the industry.

We call St. Louis home, but there are administrative, pharmacy, and customer service operations throughout the United States and Canada. Express Scripts continues to expand its services and today there are more than 11,500 employees focused on our mission to make the use of prescription drugs safer and more affordable. Our Code of Conduct (PDF file) provides the framework for our actions as we advance this mission in every aspect of our business.

Express Scripts handles millions of prescriptions each year through Home Delivery and at retail pharmacies. We share a common cause with each of our clients — to help offer a healthy prescription-drug benefit today and into the future. In support of this effort, we’ve launched The Center for Cost-Effective Consumerism. The Center and its Advisory Board provide forward thinking and key insights to drive better health and value in the pharmacy benefit. The Advisory Board includes nationally recognized experts in the science of human behavior and decision making.

By combining insights from the Center with Express Scripts' proven ability to develop, test, and implement industry-leading programs, we provide the greatest opportunity to encourage smarter prescription-drug choices and achieve the lowest total plan cost. Find out more about how our services help clients realize significant savings, while enabling better health and value in the pharmacy benefit.

Sell Express Scripts. Ticker ESRX

Sell at 76.20 to 73.22

Stop-Loss 80.00

Take Profit Areas

64.94 to 60.80

57.81 to 55.47

53.30 to 51.15

42.54 to 40.54

My Analysis of the Medical Sector

Ok, we all need health care from time to time. No wealth without health right? I agree, but with the rising costs of health care, and with the problems of the economy, and rising unemployment right now to pay for that healthcare, there’s comes a point where the cost of health care is just to much for most people and now comes the decision of foregoing the healthcare until the funds are available to pay for it. Along with the election, and possible hoopla that may arise from the presidential candidates McCain and Obama to get elected, they’re liable to say anything about high healthcare costs, and the whole medical sector could tank big time because the next president to be will talk about reigning in on high medical costs being charged currently.

I remember back in the 90’s one month before Bill Clinton’s first election to the Presidency. He stood at Merck Pharmaceuticals on a Friday at 10:30am Eastern time, with the Merck board of director’s behind him, and made a statement to the effect that he and Hillary were going to put a stop to the high health costs, fraud, and whatever, the drug, health insurance companies, and HMO’s were charging the American people. I did a double take! I looked at the Merck board of directors behind him, and they looked shocked, numb, and plain pissed off, wondering if they had heard Bill correctly. Then after that, the CNBC broadcaster said they would cut for a commercial break, and go straight to the New York floor on the return. After the 30 second commercial, they went to the New York floor, and the whole medical sector was selling off huge. Big share blocks of 100k plus selling like there was no tomorrow. They sold every medical stock no matter what it was, profitable or not. I’ve never heard a roar that loud on the floor before in my trading investing life. On Wednesday of the following week, I bought into the medical sector carnage caused by Clinton’s radical statement, and made 75% on the rebound in three months with one stock. One of the sweetest trades of my life. I’ll never forget it.

The election is a short time away now. The candidates could talk trash about the medical companies, and tank city again. Actually I believe Americans simply won’t be able to afford current medical costs right now, and the medical companies will have to reduce prices a little or a lot depending. Doing this would squeeze their profit margins, and provide a ripe environment for lower stock prices. If these two situations come together, which would be anytime now, well then it’s a perfect storm, to sell the “health” out the healthcare stocks, and a big quick crash, with a great opportunity to buy in for a rebound. The market loves doing stuff like this, and when you are prepared, fast, and nimble, booking profits can be as easy as taking a lollipop from the doctor’s office desk.

Click here to review and Trial the Trading Software I used in determining my sell position on ESRX.