Pharmacy giant Walgreens Boots Alliance (Nasdaq: WBA) is on sale. Even after its better-than-expected fiscal fourth-quarter operating results, Walgreens stock was 32% below its 52-week high as of mid-November, and its dividend yield was recently over 4.3%.
The issue for Walgreens is the pharmacy chain operating model is built on low margins and high volume.
That volume dried up when the pandemic hit, crushing front-end retail sales and hurting clinic revenue. On an adjusted basis, the coronavirus reduced earnings per share by $1.06 in fiscal 2020.
Walgreens Boots Alliance is undergoing a transformation that’s already beginning to pay off. The company is on track to recognize $2 billion in annual cost savings by fiscal 2022, while sparing no expense boosting its omnichannel presence. In the fiscal fourth quarter, online sales at Boots.com and Walgreens.com rose by 155% and 39%, respectively, from the prior-year period. The company has also increased the number of items that can be ordered online and picked up via drive-thru.
Perhaps the most exciting development is Walgreens’ partnership with VillageMD to develop up to 700 on-site, full-service health care clinics that’ll pair with Walgreens’ pharmacies for an integrated medical experience. The strategy is to reach out to patients with chronic conditions, making Walgreens a one-stop shop for their basic medical needs.
Long-term investors should give Walgreens Boots Alliance a closer look.
Ask the Fool
Q. If I have a big loss when I sell some stock, I can deduct it on my tax return, right? – D.B., Evergreen, Colorado
A. Yup. No one likes money-losing investments, but at least they can shrink your tax bill. Here’s how it works: You first offset any capital gains from stock sales with your capital loss(es). Any remaining loss can be deducted from your income – up to $3,000 per year. Amounts exceeding that $3,000 can be carried over to the following year.
If you’re in, say, the 24% bracket and you deduct $3,000 from your income, that amount is excluded from taxation. So you save 24% of $3,000, or $720. Spend a little more time learning about tax rules and strategies, and you can probably save even more money. Start at IRS.gov or Fool.com/taxes.
Q. How much personal liability insurance should I have? – T.W., Morgantown, West Virginia
A. It depends on how much you have to lose if you’re sued. You want to prevent a lawsuit from causing you a financial catastrophe. Total the value of your home, belongings and financial assets. Add more for legal costs, though insurers sometimes cover those. Then check the liability coverage on your home and auto policies.
If your assets are considerable, consider getting an “umbrella” policy (from another insurance company, if necessary).
Umbrella policies generally offer much more liability coverage – typically $1 million or more – and charge much lower premiums than homeowner’s and automobile insurance policies do.
Insurance may be boring, but it’s really important, protecting you from potential financial losses. You can keep insurance costs down by bundling policies with the same insurer and shopping around for the best prices every year or two.
My dumbest investment
My dumbest investment was buying shares of Amazon back in 2002 – only to sell them in 2015. Yes, when I sold the shares, they had grown to eight times what I’d paid for them – but more recently, the shares are trading for about 10 times my purchase price! Lesson learned: When you have a winner, stay with it as long as you can. – H., online
The Fool responds: This was a very “smart dumb” investment, since you got a 700% gain. How dumb it actually was depends on your thinking when you sold the shares. If you simply thought that a 700% gain was good enough, that’s fair, though you might have asked yourself how much more you thought Amazon would grow. If you thought that Amazon’s future was no longer promising, then selling was definitely the right thing to do. Amazon had many unprofitable years, but that wasn’t because of a poor business model; the company was just plowing every available dollar into furthering its growth. Now it’s one of the world’s biggest companies, recently valued near $1.6 trillion.
It’s generally a good idea to hang on to your winners for decades, as long as their futures still seem rosy. They may not grow a lot every year, but over time, a 700% gain can become a 1,500% gain, which can become a 3,000% gain, and so on.
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