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Why Rite Aid Corporation (NYSE:RAD) Shares Are Surging

Rite Aid Corporation (NYSE:RAD) has popped over 8% in late afternoon trading after the New York Post published a column suggesting that there could be more hope for the merger between Rite Aid Corporation (NYSE:RAD) and Walgreens Boots Alliance Inc (NASDAQ:WBA).

Although Walgreens has agreed to buy Rite Aid for some time now, the merger between the two pharmacy chains hasn’t closed due to FTC antitrust concerns. In particular, the government wants Walgreens to divest a substantial number of Rite Aid stores to ensure adequate competition in certain markets. For Walgreens to do that, one potential buyer, Fred’s, would need substantial cash to buy the divested stores, something that it does not currently have. According to the Post story, however, the newspaper’s sources say that ‘more than one prominent investor’ has approached Fred’s about investing capital in the chain that might help it buy the proposed divested Rite Aid stores. If that should occur, the merger between Rite Aid and Walgreens would be more likely to close (although the final outcome is still anyone’s guess).

What Does The Smart Money Sentiment Say?

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 39.7% gains over the past 12 months and outperformed the 24.1% gain enjoyed by the S&P 500 ETFs. Our enhanced small-cap hedge fund strategy returned more than 45% over the last 12 months and outperformed SPY by more than 30 percentage points over the last 4.5 years (see details here).

Some smart money funds left Rite Aid in the fourth quarter. According to our data, 42 top funds were long Rite Aid Corporation (NYSE:RAD) at the end of December, down 12 funds from the previous quarter. Those numbers are out of the 742 total funds we track.

The Bottom Line

Rite Aid Corporation (NYSE:RAD) shares have rallied on the back of a New York Post story that suggested one possible roadblock over the RAD/WBA merger could be lifted. For more reading, check out ‘Bayer Heroin, Coca-Cola’s Cocaine, and Mrs. Winslow’s Soothing Syrup: Is Sugar More Addictive Than Drugs?‘.


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