Walgreens: Doldrums or Opportunity?

09/06/2016 8:00 am EST

Focus: STOCKS

Charles Carlson

Editor, DRIP Investor

I have been a long-time owner of this featured stock; in fact, it has been in the Editor’s Portfolio since our very first issue going back nearly quarter century, explains Chuck Carlson, editor of DRIP Investor.

Walgreens Boots (WBA) has been perhaps my best holding. However, there have been a number of time periods where the stock simply did nothing.

While frustrating, those do-nothing periods turned out to be excellent buying opportunities in the stock.

I mention all of this because Walgreens is currently in one of those sleepy periods, which means it is probably a good time to be buying the stock.

A number of factors are playing into the recent doldrums:

  1. Walgreens had a high-profile relationship with Theranos, a heavily-hyped lab-testing start-up that has failed to meet expectations. Walgreens has cut ties with Theranos, but there could be future litigation involving this relationship.
  2. Walgreens is in the midst of acquiring Rite Aid, a drugstore chain. Wall Street seems to have mixed emotions on this deal, fearing Walgreens may be overpaying. There are also questions whether the deal will clear regulatory hurdles.
  3. Walgreens’ overseas operations — the merger with Alliance Boots broadened the company’s footprint internationally — are feeling the effects of sluggish overseas economies and Brexit concerns.

Despite these issues, I continue to like the underlying business and expect the company’s expanding global footprint to drive revenue and earnings growth over the long term.

The stock is yielding nearly 2%, so investors get a decent payback while waiting for a sustained upward move in the stock. Patient investors would do well to buy these shares now.

Please note that Walgreens offers a direct-purchase plan. Minimum initial investment is $250.

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By Chuck Carlson, Editor of DRIP Investor

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