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Walgreen Co. Message Board

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  • big.yank big.yank Jan 28, 2012 12:45 PM Flag

    Short Wag

    A short strategy, here, is all in the tealeaves. CVS reports 2011 yearly numbers on 2/8 before the bell. If the CVS C/C highlights growth from cannibalizing Walgreens ESRX lost client base, look out below. The other immediate factor will be Rite Aid's January sales figures which should come out around that same date, with impact from marketshare gains potentially less than CVS data, but another page in the book.

    I have decided not to take a short position on Walgreens at this time. This has less to do with equivocation on a negative view towards WAG and more to do with two plays in alternative energy that I prefer to pursue with my quarterly dividend gains from my extensive mReit holdings. I am holding firm on my other positions in RAD and Walmart. And cash = 40%. The cash will remain reserved awhile longer.



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    • very solid post yank, those are always welcome. Do you think wag can at least maintain the dividend and keep earnings flat the next 2 years?

      • 1 Reply to milo_hanson
      • milo,

        First and foremost, WAG has always had the ability to man up and just settle with ESRX. If this happens, their stock would see an immediate 10%+ bounce-back. They would then have years to work on new margin sources to offset the reduced reimbursements. I do think a major management change would need to transpire for this to happen... at least Wasson and Crawford... but a board intervention could force the issue. Remember that Walgreens (intelligently, by the way) loaded their B-o-D with outside/non-Executive Directors. A settlement with ESRX would lead to an absolute slaughter of shorts, IMHO.

        I do not think WAG can afford to or will lower its dividend. I do believe additional share buybacks are unlikely and, interesting to note, no new one was announced at Navy Pier this year. Earnings can and must be kept at least flat and that can be accomplished only in two ways. Close a lot of underperforming stores (see my October post "The Armageddon Chronology") or buyout Rite Aid and force ESRX to capitulate. I actually believe that the latter is the more likely, explaining why I more than doubled my position in RAD 60 days or so ago.

        This is a very fluid scenario. I have stated previously that I would not go either long or short on either Walgreens or Express Scripts because a massacre in the evolving impasse is entirely possible, maybe even probable. I have better opportunities on my radar. Take a look at CLNE if you think LNG has bottomed. I have traded in and out of it for years and will be going long again, next week. Cramer hinted that Obama might force the USPS to go 100% natural gas and, to me, CLNE is the likely primary beneficiary in such a deal.



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