New Trade for May 6th, 2022

Following a sharp sell-off during yesterday’s trading session, stocks continued to lose traction overnight, slipping deeper into the red during pre-market trading this morning.  Yesterday’s losses erased gains from Wednesday’s post-FOMC meeting rally after Fed Chair Powell ruled out the prospects of more significant rate hikes.

“The widely anticipated relief rally seen in equities and bonds post the ‘less hawkish than feared’ Fed on Wednesday was short-lived,” Barclay’s strategist Emmanual Cau said in a note to clients.  “Although aggressive 75 basis point hikes going forward may be off the table, the implied policy tightening cycle ahead is still very hawkish, in our view.  Unless surging inflation quickly reverses its course (watch US CPI print next Wednesday), central banks may have no other choice than slowing growth to slow inflation and stay credible.”   

With a more stringent Fed in mind, many investors seek companies from defensive industries that have a reputation for being resilient during economic weakness.  Today we’re highlighting one such company.  What’s more, the stock currently seems to be trading at a discount considering its solid fundamentals and 2022 growth prospects.

Trusted neighborhood pharmacy Walgreens Boots Alliance (WBA) has always been a popular place for consumers, creating the perfect conditions for remarkable stability throughout the years both in terms of margins and revenue.  

Despite beating expectations for earnings and revenue during its fiscal Q2 call last month, the stock is down on concerns around slowing pandemic demand and vaccination foot traffic.  WBA’s share price today is just a stone’s throw away from its 52-week low of $42.90.  However, the fundamentals remain solid, making it hard for long-term-minded investors to see this as anything less than a reasonable bargain.

There is no doubt that the company has benefitted from the 63 million COVID-19 vaccines administered and concerns are legitimate that revenue will suffer due to the diminishing need for vaccines. The company said in a news release it administered 11.8 million vaccines in the second quarter, down from the 15.6 million in the previous period.   With Walgreens’ share price down nearly 20% over the past year (underperforming the S&P 500, which is down less than 2% in the same period), those headwinds are arguably factored in.  

The company’s $5.2 billion investment in primary-care business VillageMD last year set the stage for the launch of doctor’s offices at hundreds of Walgreens locations across the country.  While management cautioned that it could take two years for the partnership to scale to “a reasonable level of operations” for patient investors, the collaboration will likely provide solid growth opportunities for the business.  Walgreens management sees 1,000 co-located clinics across more than 30 markets by 2027.

On a forward price-to-earnings basis WBA is cheap compared to its top competitor CVS, which also administers vaccines.  CVS currently trades at nearly 18 times forward earnings while WBA trades at less than 6 times earnings.  WBA also boasts an impressive 4.36% dividend yield where CVS has a yield of 2%.

Should you invest in Walgreens right now?

Before you consider buying Walgreens, you'll want to see this.

Investing legend, Keith Kohl just revealed his #1 stock for 2022...

And it's not Walgreens.

Jeff Bezos, Peter Thiel, and the Rockefellers are betting a colossal nine figures on this tiny company that trades publicly for $5.

Keith say’s he thinks investors will be able to turn a small $50 stake into $150,000.

Find that to be extraordinary?

Click here to watch his presentation, and decide for yourself...

But you have to act now, because a catalyst coming in a few weeks is set to take this company mainstream... And by then, it could be too late.

Click here to find out the name and ticker of Keith's #1 pick...