Thursday, September 13, 2007

Investing Based on Demographics - WAG, CVS

Walgreens (WAG)
“Walgreen Co., based in Deerfield, Illinois, filled 529 million prescriptions in fiscal 2006, and pharmacy business accounted for 64.3% of its $47.4 billion in sales. Walgreen also sells over-the-counter medicines which accounted for 11% of sales, as well as general merchandise (which accounted for about 25% of sales), ranging from digital photos to pinto beans. The company's Walgreen's Health Initiatives business manages pharmacy benefit plans for companies and other organizations. As of the end of, August, Walgreen operated 5,992 drugstores in 48 U.S. states and Puerto Rico.”

Dividend Yield: 0.86%
ROE: 19.88%
ROI: 18.68%
PE: 21.6X
Estimated 2007 PE: 21.3X
Estimated 2008 PE: 18.87X
S&P Rating: 5 Stars, Strong Buy, $56 price target
Argus Rating:Buy $53 price target
-paid a dividend for 299 straight quarters
-raised its dividend for 32 consecutive years.

THESIS: the thesis behind this company is obvious: older people take more drugs and fill more prescriptions. WAG should also benefit from seniors buying more beauty items in an effort to keep looking young, as well as more impulse items simply because they’ll be in the store more.

CVS Caremark Corporation (CVS)
“CVS Caremark is the #1 provider of prescriptions and related healthcare services in the nation. The Company fills or manages more than 1 billion prescriptions annually. Through its unmatched breadth of service offerings, CVS Caremark is transforming the delivery of healthcare services in the U.S. The Company is uniquely positioned to effectively manage costs and improve healthcare outcomes through its 6,200 CVS/pharmacy stores; its pharmacy benefit management, mail order and specialty pharmacy division, Caremark Pharmacy Services; its retail-based health clinic subsidiary, MinuteClinic; and its online pharmacy, CVS.com”

Dividend Yield: 0.64%
ROE: 8.95%
ROI: 6.95%
PE: 21.75X
Estimated 2007 PE: 19.78X
Estimated 2008 PE: 16.27X
S&P Rating: 5 Stars, Strong Buy, $46 price target
Argus Rating: Buy, $40 price target

THESIS: is the same as with WAG: older people take more drugs and fill more prescriptions. CVS should also benefit from seniors buying more beauty items in an effort to keep looking young, as well as more impulse items simply because they’ll be in the store more.

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