Update on WAG

Note: I wrote this on Oct. 23 (so noted because I cite a price from the 23rd below.)

Some of you have written in to ask what's going on with WAG.  Hopefully you guys are using good tools like I taught you in Rule #1.  Those tools and price strategy will have put you in WAG at $45 and out of WAG at $41.  It's now at $38.

First question: Is WAG a wonderful business to own for the future?  You have to answer that yourself, but there is no question that it has been the best run drug store business for many years.  It has a consistent growth rate at 15% for two decades, and that is unchallenged in the industry and almost without peer in the market. 

It's got issues with generic drugs cutting into profits, but that may not be that big a deal.  You need to do your homework and decide what you think because you have to know if you can price this thing. 

A 15% growth rate and a corresponding 30 PE give it a $60 value, as I said on The Millionaire Inside.  But that was then and this is now.

The analysts average estimate has fallen due to at least one negative analyst who is projecting a 3% annual growth rate for the next 5 years.  We have to take that seriously, so we always use the lower of the analysts' projection or the historical projection. 

History says 15% but the analysts are saying 13.8% and the historical PE is right at expected PE of 27. 

Use those numbers and you get a value of $50.

With a 20% requirement for MOS (because we've bought and sold it before, we're allowed a 20% MOS), we get a buy at $40 if we are experienced.   Stick with the 50% MOS if you're new to WAG -- that's $25.

So our more experienced investors can buy in with the price it's at today.  But YOU decide.  Not me, not your broker, not your uncle.  You decide if you want to own Walgreens for $38 a share.  And if you aren't sure, you just haven't done enough homework.  You learn the business they are in and you will become sure of what you are doing.

Now go play.