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Pills Are Good! Pills Are Good!

Updated: Mar 15, 2022

Do you like cheap drugs? I do! Apparently, so does Jeff Bezos. You know who doesn’t love cheap drugs? CVS, Walgreens, Rite Aid, Publix, Kroger, and any other brick and mortar drug store! Sad!

Amazon’s acquisition of PillPack is a proverbial game changer. I don’t know what this means for the long-term pricing power of prescription drugs. What I do know is that this acquisition is brilliant. Sick people need efficiency and competitive pricing more than anyone. Amazon has an opportunity to make their lives easier. I’m not an expert on big pharma, or the drug industry as a whole, but I know a good idea when I see one.

I’ve been skeptical of Amazon’s acquisitions in the past, but I’m not on this one. How accretive this will be to the bottom line is anybody’s guess, this may only serve as a massive disruption to an otherwise boring and slow-moving sector. Only time will tell.

Nevertheless, I’m intrigued by this move and you should be too. This doesn’t mean the average investor should go out and buy AMZN. This means that the average investor should take a quick peak under the hood of their ETFs and mutual funds to determine where their exposure is.

If you own a bunch of drug store stocks, you are probably sad, and that’s okay. They are not going to go out of business tomorrow. Stocks always react violently to unexpected news. As one of my favorite minds in the industry always says, “Risk happens slowly, and then all at once!” -Keith McCullough

You shouldn’t panic in situations like this. You need to understand what you own, especially if you are a DIY investor. This is a great opportunity to take a look at your holdings and your sector diversity to see if your funds are acting like they are supposed to.

If you just don’t care about short-term moves in the market or specific sectors, you are probably better off in the long run (as long as you don’t own a bunch of crap)! Emotional investors are typically bad investors. Can I get an AMEN?

Final thought: Mergers and acquisitions will sometimes be telegraphed and subject to government approval, and sometimes they will be out of the blue. The latter is where you can take advantage of arbitrage opportunities. How you do that is up to you, but the opportunities will not be ever present. Special note, if you don’t know what arbitrage is, you shouldn’t use your google findings to come up with actionable ideas right now.



Any opinions are those of Alex Leonida and not necessarily those of Raymond James. All opinions are as of this date and are subject to change without notice.

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