My “Dow Underdogs” contrarian investment strategy, an approach discussed in my book, Winning with the Dow’s Losers, focuses on the worst-performing stocks in the Dow Jones Industrial Average in a given 12-month period, explains Chuck Carlson, editor of DRIP Investor.
While no investment approach works in every market, betting on these “Dow Underdogs” to rebound after a period of underperformance has a pretty good track record over the long term. (For more information on this strategy, along with a long-term performance record, visit the web site at www.dowunderdogs.com).
Going into 2021, one of the top Dow Underdogs is Walgreens Boots Alliance (WBA). Walgreens is especially notable as a Dow Underdog given that it was the worst-performing Dow stock in 2019 and posted another dreadful performance in 2020, down more than 30%.
However, there are reasons to be optimistic for 2021. The company’s per-share profits and revenues beat estimates in the most recent quarter. Business should get a lift from the company’s participation in providing the coronavirus vaccines.
The company’s per-share profits and revenues should grow in 2021. The stock’s dividend yield of 4.6% is more than double the yield on the S&P 500 and should provide some downside support to these shares.
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Admittedly, given Walgreens terrible performance in 2019, I would have expected 2020 to be a better year. However, I think the stock is set up nicely for big “mean reversion” in 2021. Trading at just eight times its 2021 earnings estimate of $4.80 per share, the stock is plenty cheap.
I own the stock and believe it offers one of the better contrarian plays for 2021. Please note Walgreens offers a direct-purchase plan whereby any investor may buy the first share and every share directly. Minimum initial investment is $250.
