As a $40 billion drugstore empire, it's no surprise that there's plenty of retail and institutional interest in Walgreen
Turns out, the view is neutral-leaning-bullish. Let's have a look at a few of the key sentiment drivers.
1. Analyst opinion
Analysts are neutral to bullish on Walgreen. Data from Yahoo! Finance captures their collective feeling:
|
Strong Buy |
6 |
|
Buy |
10 |
|
Hold |
12 |
|
Sell |
0 |
|
Strong Sell |
1 |
Sixteen analysts have a rating of buy or strong buy, but 12 have a "hold." And rather unusually (analysts notoriously underutilize sell and strong sell ratings), one analyst has a "strong sell" rating on the stock. For purposes of this exercise, we'll classify analyst opinion as neutral-leaning-bullish.
2. Insider buying
The insider buy/sell picture is decidedly neutral. Over the past year, Walgreen insiders have sold $1.5 million worth of their company stock. While that sum isn't meaningful relative to the company's market cap, during the same time period, insiders didn't buy a single share of stock. (Data from Form4Oracle.) While we'd really like to see net insider buying, the trend at Walgreen is neutral: Insiders are net sellers, but not in a meaningful amount.
It is worth noting that the Walgreen board of directors approved a $1 billion share buyback in October, to last through 2012.
3. Guru buying
Next, we'll look at "guru" ownership of the stock. According to GuruFocus, gurus are split on Walgreen. In the quarter ended Dec. 31, Arnold Van Den Berg and John Hussman substantially reduced their Walgreen stakes. In the quarter ended Sept. 30, Ruane Cunniff sold nearly its entire stake. On the positive end, the Dodge & Cox shop added to its stake in that quarter, as did Mario Gabelli.
Without any guru buys in the last quarter of 2010, I'll classify the overall trend as neutral-to-bearish.
4. Retail investor community sentiment
For retail investor community sentiment, I turn to Motley Fool CAPS, our proprietary stock rating system. CAPS generates ratings on a one- to five-star scale, with five stars as the highest ranking, indicating that the Fool community believes in a stock's future. Walgreen has a strong four-star rating.
5. Short-sellers
Next we'll look at whether short-sellers are circling the stock. There are 13.4 million Walgreen shares sold short, according to Capital IQ. As a percentage of shares outstanding, that's a short interest of 1.4%. That's not very high -- a struggling operator like Barnes & Noble has a short interest of 13.3% right now -- and so for determining sentiment, we'll take it as a good sign.
6. Does Buffett own it?
This is the "cherry on top" test, and in Walgreen's case, it's a no: Berkshire Hathaway does not own shares.
Adding it up
Walgreen is liked by the CAPS community, and short-sellers aren't betting against the stock in a significant way. Analysts are neutral-to-bullish, while gurus are neutral-to-bearish. The insider picture is neutral, and our final test -- Buffett's possible ownership -- doesn't apply here. Add it all up and Walgreen comes out with a bullish -- but just barely -- consensus sentiment.
Of course, you can't base an investment philosophy on who likes the stock you like, and a consensus opinion can sometimes be a scary thing. Quoting Buffett: "A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful." There's neither fear nor greed circling Walgreen right now, though.
The purpose of this series of articles isn't to make a definitive buy-or-sell call on Walgreen. Rather, by looking at a stock's sentiment, the goal is to help you place your own opinion of it in a broader context.
One final thing: If you want to keep tabs on Walgreen's movements, and for more analysis on Walgreen, make sure you add it to your Watchlist.
