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Paul Mampilly is an American investor and former hedge fund manager. Paul has been featured on CNBC, Fox Business News and Bloomberg TV. He is the founder of the popular investment newsletter Profits Unlimited, where he uses his skills, experience and knowledge as a former Wall ... more

Amazon Is Going To Crush This Entire Group Of Companies

Date: Thursday, October 12, 2017 1:26 PM EDT

That’s because in the end, all the extra cash comes from you and me, most directly through higher copays at the pharmacy and from rising health insurance rates. Finally, we also pay through our taxes when we pay for government programs like Medicare and Medicaid.

In other words, this group of companies is ripe to be Amazoned.

Transparency and Efficiency

You see, Amazon specializes in bringing price transparency and efficiency to the businesses it goes after. That’s because these are businesses that make their money because they lack transparency and efficiency.

“Amazon could bring transparency into a marketplace that is entirely lacking,” says Cahn.

Amazon poses a real, direct threat to the big drugstore companies, according to Leerink Partners.

I agree. And the stock market is noticing and beginning to price in this threat.

Already, the stock of CVS is down 28% from its high point hit in May 2016. Walgreen is down 27% from its high in August 2015. Finally, Express Scripts is down 37% from its high point in July 2015.

I believe that these companies are going to get destroyed by Amazon. That’s because their only true competitive advantage is information.

It used to be hard to get information about drug prices and pharma spending. However, this is no longer true.

This information is now available widely. And in Amazon’s hands, it’ll become a flamethrower that destroys the profits these middlemen businesses generate.

Death Traps for Your Money

When Amazon enters this business, it’ll cut prices. We know this because of other businesses that have been Amazoned. It’s also the first thing that Amazon did when it got control of Whole Foods, which it recently acquired.

With that, the profits margins of CVS, Walgreens and Express Scripts are going to be crushed. Their stocks will follow.

Now, many of you are going to be tempted to buy these stocks. They are going to look cheap. And they’ll keep looking cheap. But don’t be lured into them.

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