Category Archives: WAG

Walgreens Altimeter

Below is the Altimeter for Walgreens Boots Alliance (WBA) with fair value (FV) overvalued and undervalued targets.

Walgreen and Apple

Below is a comparison of the performance of Apple (AAPL) against Walgreen (WAG) from the IPO of Apple back in December 1980.  Circled in red is the total return of Walgreen at +13,636.70% versus +9,991.43% for Apple.

image

While there is no doubt that Apple has been a great investment in the last ten years, on a relative basis, Apple has been dead money from the IPO in 1980 to 2003.  Walgreen on the other hand, by virtue of the dividend and consistent growth, has generated exceptional total returns from the word “go”.

This is the focus of our U.S. Dividend Watch List which is the foundation of our investment strategy.

Transaction Alert: Sold WAG, XEC and UNM at the Market

Today we sold the principal portion in shares of Walgreen (WAG), Cimarex (XEC) and Unum (UNM).

  • On July 16 ,2012, we posted a transaction alert indicating that we would buy Unum (UNM) the following day (found here).  The gain in the stock has been +10.43%.  The annualized rate of return is 48.76%.
  • On July 17, 2012, we posted a transaction alert indicating that we bought Cimarex (XEC) at the market (found here).  The gain has been +16.70%.  The annualized rate of return is 85.47%.
  • On October 14, 2011 (found here), Walgreen topped our U.S. Dividend Watch list which prompted our research and purchase of the stock. The gain in WAG has been 9.70%.  The annualized rate of return is 9.70%.

All of the stocks sold comprised 22% of our portfolio. We continue to hold shares of the companies (profit portion) allowing us to slowly build a well diversified portfolio and continue to see capital appreciation and compounding of the income.

U.S. Dividend Watch List: October 12, 2012

Below are the 50 companies on our U.S. Dividend Watch List that are within 11% of their respective 52-week lows. Stocks that appear on our watch lists are not recommendations to buy. Instead, they are the starting point for doing your research and determining the best company to buy. Ideally, a stock that is purchased from this list is done after a considerable decline in the price and rigorous due diligence.

Symbol Name Price % Yr Low P/E EPS (ttm) Dividend Yield Payout Ratio
INTC Intel Corp. 21.48 0.38% 9.10 2.36 0.90 4.19% 38%
ABM ABM Industries, Inc. 18.12 1.51% 18.68 0.97 0.58 3.20% 60%
EXPD Expeditors International 34.78 1.70% 20.70 1.68 0.56 1.61% 33%
IBKC IBERIABANK Corp. 45.25 1.78% 20.38 2.22 1.36 3.01% 61%
CLC Clarcor Inc. 44.69 2.92% 18.39 2.43 0.54 1.21% 22%
ERIE Erie Indemnity Company 63.20 3.39% 22.49 2.81 2.21 3.50% 79%
WGL WGL Holdings, Inc. 39.09 3.82% 19.84 1.97 1.60 4.09% 81%
JW-A John Wiley & Sons Inc. CL 'A' 45.06 4.21% 13.86 3.25 0.80 1.78% 25%
MATW Matthews International Corp. 29.13 4.48% 13.12 2.22 0.36 1.24% 16%
ETP Energy Transfer Partners L P 42.61 3.85% 9.05 4.71 3.58 8.40% 76%
CRR Carbo Ceramics, Inc. 64.49 5.14% 11.29 5.71 1.08 1.67% 19%
HRL Hormel Foods Corp. 28.83 5.68% 16.02 1.80 0.60 2.08% 33%
PBI Pitney Bowes Inc 13.36 5.70% 3.91 3.42 1.50 11.23% 44%
CAT Caterpillar Inc. 82.82 5.84% 9.26 8.94 2.08 2.51% 23%
OMI Owens & Minor, Inc. 29.06 6.17% 15.79 1.84 0.88 3.03% 48%
VVC Vectren Corp. 28.78 6.55% 14.84 1.94 1.40 4.86% 72%
ED Consolidated Edison, Inc. 59.83 6.71% 16.53 3.62 2.42 4.04% 67%
SON Sonoco Products Co. 30.59 6.92% 15.53 1.97 1.20 3.92% 61%
STBA S&T BanCorp., Inc. 16.85 7.46% 14.28 1.18 0.60 3.56% 51%
SRCE 1st Source Corp. 22.06 7.56% 11.55 1.91 0.68 3.08% 36%
MCD McDonald's Corp. 92.51 7.67% 17.39 5.32 3.08 3.33% 58%
BUSE First Busey Corp. 4.76 7.69% 19.04 0.25 0.16 3.36% 64%
APD Air Products & Chemicals, Inc. 82.00 7.74% 13.00 6.31 2.56 3.12% 41%
UTX United Technologies Corp. 75.96 7.88% 15.92 4.77 2.14 2.82% 45%
UNM Unum Group 19.75 8.04% 26.69 0.74 0.52 2.63% 70%
ANAT American National Insurance 72.01 8.16% 10.65 6.76 3.08 4.28% 46%
PNY Piedmont Natural Gas Co., Inc. 31.28 8.24% 20.05 1.56 1.20 3.84% 77%
VLY Valley National BanCorp. 9.85 8.24% 14.49 0.68 0.65 6.60% 96%
CWT California Water Service 18.58 8.40% 21.11 0.88 0.63 3.39% 72%
SJW SJW Corp. 24.59 8.90% 21.76 1.13 0.71 2.89% 63%
LM Legg Mason, Inc. 24.39 9.08% 22.58 1.08 0.44 1.80% 41%
FDS FactSet Research Systems Inc. 93.28 9.25% 22.64 4.12 1.24 1.33% 30%
MDU MDU Resources Group Inc. 21.48 9.31% 19.01 1.13 0.67 3.12% 59%
AMAT Applied Materials Inc. 10.90 9.33% 13.13 0.83 0.36 3.30% 43%
BDX Becton, Dickinson and Co. 76.62 9.38% 13.88 5.52 1.80 2.35% 33%
GD General Dynamics Corp. 66.10 9.53% 9.69 6.82 2.04 3.09% 30%
RBCAA Republic BanCorp., Inc. 20.49 9.87% 4.06 5.05 0.66 3.22% 13%
RLI RLI Corp. 68.06 10.02% 13.24 5.14 1.28 1.88% 25%
SFNC Simmons First National Corp. 24.83 10.11% 16.12 1.54 0.80 3.22% 52%
NJR New Jersey Resources Corp. 45.27 10.12% 20.03 2.26 1.60 3.53% 71%
RAVN Raven Industries, Inc. 27.68 10.32% 18.96 1.46 0.42 1.52% 29%
PPL PP&L Corporation 29.44 10.34% 10.01 2.94 1.44 4.89% 49%
DOV Dover Corp. 55.33 10.35% 12.03 4.60 1.40 2.53% 30%
SJI South Jersey Industries, Inc. 51.49 10.68% 16.19 3.18 1.61 3.13% 51%
JCI Johnson Controls Inc 25.87 10.70% 10.31 2.51 0.72 2.78% 29%
MSEX Middlesex Water Company 19.23 10.71% 24.04 0.80 0.74 3.85% 93%
CAH Cardinal Health, Inc. 40.89 10.78% 13.11 3.12 0.95 2.32% 30%
STR Questar Corp. 20.20 10.81% 17.12 1.18 0.68 3.37% 58%
EMR Emerson Electric Co. 48.35 10.92% 14.65 3.30 1.60 3.31% 48%
COP ConocoPhillips 56.17 10.96% 6.56 8.56 2.64 4.70% 31%
50 Companies

Watch List Review

Topping out list this week is Intel (INTC). The stock continues to be under pressure especially after Advance Micro Devices (AMD) issued a profit warning. Speculation about job cuts, as much as 2,340 jobs (20% of the work force), is also circulating. AMD shares were down -14% on Friday. Despite that, Intel share were down just less than -1%.  At the current price, INTC is yielding 4.19% with a conservative payout ratio of 38%. While the short-term picture seems grim, with the PC market slowing to a halt, we still believe the that there is significant value built into INTC and it shouldn’t be ignored. Again, we took a position in Intel about a week ago and would be very excited to see it trade down to $16.

ABM Industries (ABM) has been trading in a "line" formation (between $18-$20) for nearly three months. The stock appears to be retesting the $18 level we saw in mid-July. The company announced a definitive agreement to purchase Air Serv which provides facility management services to airlines and airports. ABM expects to add $650 million to their top line through this acquisition. Based on that, we assume a Price-to-Sales ratio of 0.24 which is a decent figure. Our valuation model shows a possible downside to $15 and upside to $24, a –19%/+34% risk/reward.

Top Five Performance Review

In our ongoing review of the NLO Dividend Watch List, we have taken the top five stocks on our list from October 14, 2011 and have check their performance one year later. The top five companies on that list can be seen in the table below.

Symbol Name 2011 Price 2012 Price % change
WAG Walgreen Co. 32.90 35.94 9.24%
PEP PepsiCo Inc. 62.09 70.05 12.82%
BDX Becton, Dickinson and Co. 73.85 76.62 3.75%
AROW Arrow Financial Corp. 22.73 24.74 8.84%
FRS Frisch's Restaurants, Inc 19.52 17.13 -12.24%
Average 4.48%
DJI Dow Jones Industrial 11,644.49 13,328.85 14.46%
SPX S&P 500 1,224.58 1,428.59 16.66%

image

Our top five underperformed the market by nearly 10% partly due to the loss from Frisch (FRS).  All of the stocks on our watch list achieved a +10% gain within a year.  In fact, 4 of 5 stocks achieved 15% gains within the year. 

Despite the year end losses in FRS, it should be noted that in the process to FRS having a losing year, it also had the largest increase in the year.  FRS gained as much as +67% before collapsing within the last two months.  The performance of FRS is among the primary reasons why we choose to consider selling if the gain exceeds the historical average.

NLO Dividend Watch List: October 14, 2011

The market rebounded nicely this week and pushed many companies out of their 52-week low range. Despite that, there are some great bargains to be had. There are 26 companies on this week's list.

Symbol Name Price % Yr Low P/E EPS Dividend Yield Payout Ratio
WAG Walgreen Co. 32.9 2.81% 11.19 2.94 0.90 2.74% 31%
PEP PepsiCo Inc. 62.09 4.79% 15.80 3.93 2.06 3.32% 52%
BDX Becton, Dickinson 73.85 4.83% 12.41 5.95 1.64 2.22% 28%
AROW Arrow Financial Corp.  22.73 5.28% 12.09 1.88 0.97 4.27% 52%
FRS Frisch's Restaurants 19.52 5.34% 10.44 1.87 0.64 3.28% 34%
SYY Sysco Corp. 26.52 5.70% 13.53 1.96 1.04 3.92% 53%
CFR Cullen/Frost Bankers 46.94 6.58% 13.30 3.53 1.84 3.92% 52%
T AT&T Inc 29.15 7.16% 8.47 3.44 1.72 5.90% 50%
BCR CR Bard, Inc. 86.81 7.41% 22.91 3.79 0.76 0.88% 20%
BOH Bank of Hawaii Corp. 37.79 7.88% 11.21 3.37 1.80 4.76% 53%
VNO Vornado Realty Trust 76.1 7.93% 16.99 4.48 2.76 3.63% 62%
TR Tootsie Roll Industries  24.79 7.97% 28.83 0.86 0.32 1.29% 37%
WST West Pharmaceutical 38.23 8.12% 20.78 1.84 0.72 1.88% 39%
ANAT American Nat'l Insur. 71.27 8.46% 11.80 6.04 3.08 4.32% 51%
TRV Travelers 50.65 8.64% 9.57 5.29 1.64 3.24% 31%
BRO Brown & Brown, Inc. 18.38 9.02% 16.71 1.10 0.32 1.74% 29%
CWT California Water Service 18.17 9.10% 18.73 0.97 0.62 3.41% 64%
MSEX Middlesex Water  18.06 9.18% 19.63 0.92 0.73 4.04% 79%
MDT Medtronic, Inc. 33 9.34% 11.50 2.87 0.97 2.94% 34%
CBSH Commerce Bancshares  36.39 9.51% 12.90 2.82 0.92 2.53% 33%
NTRS Northern Trust Corp.  36.75 9.67% 14.58 2.52 1.12 3.05% 44%
WFSL Washington Federal  13.37 10.04% 15.55 0.86 0.24 1.80% 28%
PRK Park National Corp. 53.93 10.06% 12.15 4.44 3.76 6.97% 85%
ALL Allstate Corp.   24.58 10.37% 23.41 1.05 0.84 3.42% 80%
UTX United Technologies Corp. 74.2 10.55% 14.38 5.16 1.92 2.59% 37%
NU Northeast Utilities 33.08 11.42% 13.96 2.37 1.10 3.33% 46%

Watch List Summary

Topping our list this week is Walgreen Co. (WAG). Walgreen Co. is currently yielding 2.74% with a conservative P/E ratio of 11. Earnings is expected to grow 11% through 2012. With the stock being so close to the one year low, it appears that the risk-reward may have turned in favor of the investor. We have bought a 10% position of WAG as of Friday October 14th with the expectation to purchase the exact same dollar amount when the price falls by 20% or more. Like moths to a flame, we're drawn to the compounding consistency of Walgreen as demonstrated in the performance of the stock against Apple (AAPL) since Apple's IPO in 1980. In the chart below, only recently has AAPL been able to exceed the total return of Walgreen but by a relatively narrow margin.

Right behind Walgreen Co. is the well known consumer name, Pepsi Co. (PEP). Pepsi Co. has been on our list for some time now so we'll have to see how much longer it would stay. Analysts expect Pepsi to grow its bottom line by 7% next year. Although times may be different, but we can't help but remind investors of Jeremy Siegel's seminal piece "The Nifty Fifty Revisited" (found here). In that piece, Siegel reviews the performance of the "Nifty Fifty" at their peak price in 1972 before their crash. Pepsi Co. (PEP), from the peak in 1972, produced an annualized return of 16.03% in the period from 1972 to 1995.

Becton, Dickinson (BDX) is now on our watch list after our first recommendation of the stock on May 4, 2009.  According to Edson Gould’s altimeter (chart below), BDX is now selling below the price paid by Warren Buffett relative to the dividend and subsequent dividend increases.  BDX has a dividend payout ratio of 28% which indicates that earnings could fall by 50% without imperiling the company’s ability to make good on their dividend.

Watch List Performance Review

In our ongoing review of the NLO Dividend Watch List, we have taken the top five stocks on our list from October 8, 2010 and have checked their performance one year later. The top five companies on that list can be seen in the table below.

Symbol Name 2010 Price 2011 Price % change
CL Colgate-Palmolive Co. 74.90 91.99 22.82%
CAG ConAgra Foods, Inc. 21.87 25.47 16.46%
NTRS Northern Trust Corp.  48.35 36.63 -24.24%
WST West Pharmaceutical 35.11 38.3 9.09%
BBT BB&T Corp. 23.58 22.36 -5.17%
Average 3.79%
DJI Dow Jones Industrial 11,062.78 11,573.34 4.62%
SPX S&P 500 1,176.19 1,215.65 3.35%

The performance of the top five from last year, at 3.79%, was between the Dow's 4.62% and the S&P 500's 3.35%.

Three of the top five stocks from last year performed above the level of the S&P 500 and Dow Jones Industrial Average.  Colgate-Palmolive (CL) cranked out a return of over 22% despite sporting a subpar dividend yield of 2.83%.  ConAgra managed to generate a return of 16% with a dividend yield of 4.21% at the time the list was generated.  Northern Trust (NTRS) got hammered with a decline of -24.24%.

Disclaimer:

On our current list, we excluded companies that have no earnings. Stocks that appear on our watch lists are not recommendations to buy. Instead, they are the starting point for doing your research and determining the best company to buy. Ideally, a stock that is purchased from this list is done after a considerable decline in the price and extensive due diligence. We suggest that readers use the March 2009 low (or the companies' most distressed level in the last 2 years) as the downside projection for investing. Our view is to embrace the worse case scenario prior to investing. A minimum of 50% decline or the November 2008 to March 2009 low, whichever is lower, would fit that description. It is important to place these companies on your own watch list so that when the opportunity arises, you can purchase them with a greater margin of safety. It is our expectation that, at the most, only 1/3 of the companies that are part of our list will outperform the market over a one-year period.

Please consider donating to the New Low Observer. Thank you.