Thursday, September 20, 2007

bought some Walgreen Co.

I purchased an initial position in Walgreen Co. today from my wife's RRSP account. I already own some WAG in our non registered account. Readers of this blog have heard previously why I like Walgreen (WAG) going forward as a long term investment. Check my archives to find out more about WAG. With the Canadian dollar pretty much at par, and Walgreen still shuffling around $45 / share, I thought this was as good a time as any to buy some. The currency change alone over the past 6 months has made this purchase a much more economical one than previously when I first got involved.

The defensive nature of Walgreen is always evident when you look at its performance vs. the index when things go bad for the markets. WAG's share performance from July 15 forward (when things started to go bad for credit markets) when compared to the S&P illustrates this very well.

5 comments:

Anonymous said...

Sucks the Canadian brokers rip you off so much on foreign exchange in those RRSP accounts though.

I invest using TD e-series funds in my RRSP; the 1% I save in forex goes a long, long way towards paying the extra MER involved.

augustabound said...

I'm a bit surprised to see you bought at these levels. I've seen previous blogs and posts from FWF and CB of your and we seem to have similar valuations for companies. With a PE of 23 and modest EPS growth going forward, do you see more upside to WAG?

MG said...

augustabound,

I see huge upside to WAG. I don't think a P/E of 22 is high at all for WAG. These are historically low P/E's for this company. Shoppers Drug Mart trades at a P/E of 26.

I would argue that EPS growth going foward is not modest at all. I see analyst estimates of 22% for 2007, 12% for 2008, and an average growth rate of 15% for the next five years. Their EPS growth history has been very good.

I see little downside and very much upside at this price. I don't believe the stock will trade at a P/E of less than about 20, and I don't see any reason why they can not continue to grow earnings at 12%+. Same store sales have been great and ROE levels have been very good. Demographics are a wind at their back for years to come.

augustabound said...

Upon further review, I now realize that my growth numbers were wrong when I was looking at WAG. Not sure if I calculated the % wrong or had the wrong numbers to begin with. Sorry bout that. My bad. I usually double check stuff like that.

Anonymous said...

Bad timing.. stock is down 15% today. Do you think now is a good time to buy?