Regardless, the entire health care sector is under pressure. The sector's forward price-to-earnings ratio (FPER) of 14.8 at the beginning of September made it one of the cheapest sectors in the S&P 500 Index. Only energy and financial stocks are cheaper, and they are both dealing with enormous macroeconomic trends that may take several years to unwind. However, Walgreens' problems could all be solved within the next year. Boris Johnson, the newly elected Prime Minister of the United Kingdom, is pushing for a no-deal Brexit resolution that could end up driving Great Britain back into the arms of the European Union if he fails. The Democratic Party may abandon a single-payer health care plan for something more palatable to swing votes prior to next year's election. And Amazon, whose presumed infallibility in online retail marketing has been recently refuted by the likes of Target (NYSE: TGT) and Walmart (NYSE: WMT), may discover the online drug business is more trouble than it's worth. Priced to Move Of course, all of that is conjecture (or wishful thinking) and may not happen. What I do know for a fact is that Walgreens' FPER of only 8.3 times next year's earnings is about half the multiple for the overall stock market. Also, Walgreens' forward annual dividend yield of 3.6% is more than twice the yield of the 10-year Treasury note. And that's at a payout ratio of less than 35%, meaning the company has room to raise the dividend if that's what it takes to attract investors. One thing Walgreens has been doing with its free cash flow is buying back its own stock to the tune of $10 billion. That obviously hasn't prevented its share price from falling, but it should help it rise faster once it starts heading back up. I don't know exactly when that will be, but I'm going to hold WBA into next year to see if my hunch pays off. Someone else who has a good feeling about Walgreens is my colleague Jim Fink. Jim Fink is the chief investment strategist of Options For Income, Velocity Trader, and Jim Fink's Inner Circle. Last week, he opened a position in WBA that has the potential to deliver a 100% gain in just eleven days! How does Jim do it? Jim has developed a proprietary investment method that consistently beats Wall Street at its own game, in markets that are going up, down or sideways. Now, Jim is making this bold promise: "If I don't deliver 24 triple-digit winners over the next 12 months…I'll happily give up $1,950." Want to learn about Jim's next trades? Click here now for all the details. |
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