WAG is Hot
Yesterday I talked about how I believe that Walgreens (WAG) is a strong buy at this level. Today's New York Daily News contains another article about how hot WAG is (no not the hot World Cup soccer wives and girlfriends which are also known as WAG that we keep hearing about).
The company posted very solid June sales, Duane Reade sales boost to parent company Walgreens.
Apparently, the chain's recent acquisition of Duane Reade is already psying dividends. Including these newly acquired stores, WAG's sales rose 8% in June to $5.7 billion. True Walgreen's same store sales rose only 2% in June, but that's still an improvement. If the company can continue deploying its cash wisely by making acquisitions like this shareholders stand to benefit in the future.
As I mentioned yesterday while pharmacies do have some exposure to the consumer, many of the things that they sell are non-discretionary.
Additionally, pharmacies will have two major trends putting wind in their sails for years to come:
1) an increase in the number of people who have healthcare coverage and in turn will go to their stores to buy stuff
2) the introduction of a huge number of generic drugs over the next several years...which are significantly more profitable for pharmacies than brand name drugs.
You can even throw in the possible defection away from Johnson and Johnson's (JNJ) expensive brand-name drugs towards store brand generics after the company's recent quality problems as another possible boon to pharmacies.
If I hadn't personally already chosen to play these trends using CVS, which was cheaper than WAG at the time I bought it and has the added kicker of its Caremark benefits manager division, I would strongly consider buying Walgreens in real life.
Long CVS in real life and CVS / WAG in CAPS