Jim Cramer Likes Express Script Stock 2009-2010

Jim Cramer likes the health care stocks right now, especially given Obama’s failed strategy to enlist the American people in a plan and any decision is delayed to 2010. The american public has overwhelmingly rejected the plan, the older population and Baby Boomers had paid for and expected Medicare benefits and do not like the idea of taking those benefits away to redistribute them to the masses.

Jim thinks your biggest healthcare stock  position should be Express Scripts (ESRX). Jim believes health care is in a multiple expansion phase.

ESRX is one of the nation’s largest pharmacy benefit managers, it provides services to 50 million customers. In the spring they acquired NextRX, providing another growth engine for Express Scripts.  The stock has grown by 30% in 2009.  Jim also like MedcoHeath (MHS) as they are in a competing business. Jim is not as strong on CVS Caremark- feeeling that they might have dropped the ball.

Jim also likes the drug companies with Bristol Myer (BMY) and Abbott Labs (ABT) being long term Jim Cramer favorites.

The  financial strength rating is Medium-High, the second-highest peg on our five-point scale, from Medium. ExpressScripts generated strong cash flow from operations in 2008, and we expect it to continue to do so in 2009. The debt/equity ratio stands at 27%, compared to 56% a year earlier. Cash flow from operations was $286 million for the first three months of 2009,compared to $253 million in the year-ago period.

Risks

Every year, Express Scripts faces the risk of renegotiating contracts with about one-third of its customer base. Still, it usuallyretains the vast majority of these customers. The company faces competition not only from other independent PBMs, such as Medco, but also from the in-house PBM operations of managed care companies such as UnitedHealth and Aetna as well as from CVS/Caremark.

Image via Wikipedia