New Trade for November 23rd, 2022

Stocks ticked lower this morning in anticipation of  FOMC meeting minutes, due this afternoon.  Investors will look for clues about the central bank’s approach to monetary policy.  

Value-oriented shares have been performing well recently and have been supported by gains in the consumer staples sector.  There are a multitude of experts proclaiming that value stocks will be en vogue in 2023 – and indeed, many have already started to rally in 2022’s late innings.  

Today’s recommendation is a company from a defensive industry with a reputation for being resilient during times of economic weakness that’s currently trading at a discount and seems to be gaining traction as investors focus more on finding value. 

Stock Picks:

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Trusted neighborhood pharmacy Walgreens Boots Alliance (WBA) has always been a popular place for consumers, but like many consumer-driven businesses, Walgreens has been under pressure in 2022.  As both a healthcare play and a consumer staples retailer,  WBA is known for remarkable stability throughout the years in terms of margins and revenue, making it an attractive option for anyone seeking dependable value.  

Last year, the company’s $5.2 billion investment in primary-care business VillageMD 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.

Despite rallying more than 30% in recent weeks, WBA is still trading at a significant discount compared to peers.  WBA is valued at around 25% of total sales, compared to top competitor CVS Health (CVS), which is currently valued at about 40% of total sales.   CVS trades at nearly 12 times forward earnings, while WBA trades at less than 7.5 times.  WBA also boasts an impressive 4.8% dividend yield, whereas CVS has a yield of just over 2%.  The stock is still down 25% this year but may continue to build on recent momentum as investors turn their focus toward value.