CNBC’s Jim Cramer on Tuesday suggested why CVS Health and Dollar General, stocks that lagged last year, have seen gains recently. He attributed the turnaround in part to the idea that these two have become the most competitive in their sectors.
“There’s a lot that goes into this, but at the end of the day, I think CVS and Dollar General both benefit from their newfound sole survivor status,” he said. “Investors are piling into these two because their top competitors are falling apart, leaving CVS and Dollar General as the last men standing in their respective industries.”
Cramer reviewed dynamics that originally led to the each stock’s decline. He noted that the drugstore giant’s earnings largely disappointed in 2024, missing estimates for three consecutive quarters. CVS’ business has been weighed down by its health insurance arm, Aetna, which incurred higher than expected costs. Investors soured on Dollar General after the budget chain failed to meet earnings estimates for much of last year, and Cramer said some on Wall Street worried business would get worse due to global tariffs.
But the tide started to turn for CVS stock when the company managed a substantial earnings beat in February and struck a positive tone about reworking its health insurance business, Cramer said. He proposed that investors were also encouraged that CVS reiterated its full-year forecast after cutting its outlook several times last year, adding that it is a “a textbook recession-proof stock.” But he said CVS’ recent strength stems largely from the failure of its chief rival, Walgreens, which announced it would go private in March after been bought by a private equity firm. Cramer suggested the sale would lead Walgreens to shutter more store locations, noting that the struggling drug giant had already been downsizing. With Rite Aid bankrupt, Cramer alleged that CVS stands largely unchallenged.
Dollar General, too, now finds itself as the main player left on the field, after its chief rival, Dollar Tree, agreed to sell its ailing Family Dollar chain to private equity, Cramer continued. He predicted the sale would lead to more store closures, which is good news for Dollar General. Although Dollar General recently reported a mixed quarter, Cramer said he thinks the company is making progress improving business. He also cited a recent analyst note from Citi, which said Dollar General will be less affected by new tariffs than some of its peers because it sells more consumable than discretionary products.
“CVS and Dollar General have caught fire this year because they’re recession-proof businesses that are moving in the right direction, and they’ve both got key competitors that are likely to close many stores after being taken private,” Cramer said. “Any time one of your top rivals goes into retrenchment mode, that’s a win.”
CVS and Dollar General did not immediately respond to requests for comment.
Read More: Shares of CVS and Dollar General made a turnaround due to their ‘newfound sole survivor