Shares of Walgreens Boots Alliance (Nasdaq: WBA), the parent company of Walgreens and European pharmacy and health-and-beauty chain Boots, were recently trading nearly 40% below their 52-week high. Facing challenges from both e-commerce specialists and big-box retailers, the company is nursing a stalled revenue line with the help of equally stable bottom-line profit and cash flow.
But the retailer isn’t sitting still. Walgreens is reshaping its business model as we write this, planning to close 200 underperforming stores in 2020 while introducing Jenny Craig store-within-a-store concepts in other locations. The company also aims to be among the first to try a drone-based delivery service, undermining some of the advantages that online stores claim against brick-and-mortar stores.
Stable sales and cash flow aren’t exactly what retailers dream of, but they’re better than watching these metrics plunge under the assault of e-commerce. Walgreens keeps increasing its dividend payouts, and its yield was recently well above 4%. Its price-to-earnings (P/E) ratio was recently 11, and the company has consistently posted a profit in each of its past 10 quarterly results.
With its track record of consistent annual revenue increases and its status as a provider of essentials during the COVID-19 shutdown and beyond, Walgreens looks like a prudent investment choice.
Ask the Fool
Q. How should I invest in socially responsible companies? – D.L., Monticello, Minnesota
A. The easiest way is to park your dollars in one or more mutual funds – or exchange-traded funds, known as ETFs – that follow socially responsible guidelines. That way, you’re letting the fund managers do the research and make the buy and sell decisions. Or, in the case of passively managed funds, you’re simply investing in the same securities that are in a socially responsible index. Some will have the acronym ESG in their title, meaning they focus on environmental, social and governance factors. Note, too, that some of these funds invest in companies that do well on socially responsible measures, while others simply exclude companies that don’t.
Some funds you might look into include the Vanguard FTSE Social Index Fund Admiral Shares (VFTAX), the iShares MSCI USA ESG Select ETF (SUSA), and the Vanguard Global ESG Select Stock Fund Investor Shares (VEIGX).
You can also invest in individual companies you select on your own, but first you’ll need to decide which issues matter most to you. For example, you might consider the environment; gender equity and diversity; workplace conditions and other human rights issues; and whether you’re willing to support companies involved in gambling, tobacco, weapons and/or alcohol. Few companies will be perfect on every issue. Learn more at GreenMoney.com, CorpWatch.org and CSRwire.com .
Q. What’s a sector? – C.F., Erie, Pennsylvania
A. The words “sector” and “industry” are often used interchangeably, but sector often refers to a larger segment of the economy. The industrials sector, for example, includes the airline industry as well as the construction industry, while the health care sector includes everything from hospitals to medical-device makers and biotech companies.
My dumbest investment
My dumbest investment was investing in shares of a company that had an innovative, reportedly environmentally friendly fracking technology: pumping a propane gel deep into the ground to release natural gas instead of pumping in water, which would get polluted. (The propane was recaptured above ground.) This technique was supposed to revolutionize the fracking industry, but my shares went from trading for about $10 apiece to bankruptcy, which the company filed in 2015. That was the first and last time I bought into a company without doing fundamental analysis prior to purchase. It was a great learning experience about dealing with hype. – S.H., online
The Fool responds: This was a classic penny-stock fiasco. Digging online, you can run across excerpts hyping the unprofitable little company with words such as this: “an extraordinary new technology … which will fuel the fracking Mega Trend for decades.” “It is a fortune in the making. Keep reading to learn how you can collect yours, starting now.” “In addition to immediately solving every environmental concern over fracking in the U.S., there’s a very real possibility this company’s technology could actually get MANDATED … by every oil- and gas-producing country in the world.” Breathless language like this is a big red flag.
The company’s technology was intriguing, but it would have been best to watch it for a while, waiting for it to establish a track record of growth and profits.
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