Edition #3 — June 9, 2024

Cheap for a reason? Read the footnotes before you judge

Company: Walgreens Boots Alliance (WBA)

Summary: Bargain stocks can tempt — but hidden risks lurk in the fine print. Value, without quality, can be a value trap.

Walgreens looks statistically cheap. Dig into the details and the difference between opportunity and trap becomes clear.

• Quality: Retail pharmacy with declining margins, challenged business model, and reputation issues.

• Moat: Store footprint is tough to match in the US, but digital disruption is gnawing at relevance.

• Management: Recent turnover, shifting strategy, urgent need for a turnaround plan.

• Valuation: Dirt cheap on PE, but free cash flow and debt obligations tell a harder truth.

• Risks: Squeezed by both Amazon/online and PBM pricing power. Dividend sustainability is in doubt.

Verdict: Price is what you pay, value is what you get — and right now, Walgreens looks like a value trap until proven otherwise. Watch, don't rush.

Next Steps: Put on watchlist, revisit after next quarter’s results.

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