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Stock Market Analysis Video
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Today I want to talk to you about two companies that are benefiting from growing interest in electric vehicles. The first is Walgreen (WAG), which partnered with NRG Energy (NRG) in November to install high-powered rapid charging stations for electric vehicles at 18 Walgreen locations in Houston, Texas. The first station in set to be installed next month.
The second is General Motors’ (GM), which announced this week at the Detroit Auto Show that it plans to produce more plug-in hybrid vehicles based on its Chevrolet Volt.
Initial estimates show that General Motors could build 25,000 Volts next year, more than double its original estimate of 10,000 vehicles, indicating that demand for plug-in hybrid vehicles is growing. The Volt was even named the North American Car of the Year at the auto show.
This focus on electric vehicles bodes well for both Walgreen and General Motors. First, let’s discuss Walgreen ...
Walgreen is a Cabot Benjamin Graham Value Letter stock, which means its best suited for investors who are looking for steady, long-term growth. (In addition to its push into the electric vehicle market, Walgreen is also poised to benefit from the large population of aging Baby Boomers.) Editor Roy Ward featured the stock in his newsletter almost a year ago writing this:
Is it Undervalued? The company’s stock price increased just 26% during the past decade while earnings and dividends more than tripled. We believe the company’s stellar performance will now be rewarded and push WAG shares to our Minimum Sell Price within the next one to two years.
Company Profile:
Walgreen, founded in 1901, is the largest drug store retailer based on sales. In addition to 7,000 drug stores, the company operates 680 health clinics within existing stores and on employer worksites. Walgreen’s clinics offer primary and acute care, pharmacy and disease management services, and health and fitness programming. The company’s strategy of continually adding new stores and renovating old stores rather than acquiring smaller competitors has led to steady, reliable growth for decades.
Outlook:
Same store sales increased by 4.9% in October 2009 and 3.9% in November 2009. New management is renovating existing stores, cutting operating costs and improving customer service. The dividend yield is 1.5% and growing.
Walgreen operates over 8,000 drugstores in all 50 states and has shown strength even during the recent recession, with sales growing 6%-10% in 12 of the last 13 quarters. Analysts see Walgreen having a 20% increase in fiscal 2011 earnings to $2.61 per share and another 15% gain in 2012.
And with all those new electric vehicles on the road, Walgreen is sure to see a boost from its charging stations. Walgreen is still listed as a buy under 36.60 in the most recent issue of Cabot Benjamin Graham Value Letter and Roy recommends holding until the stock reaches his Minimum Sell Price of 56.03.
Now for General Motors, which hit some major speed bumps during the Great Recession, but has rebounded nicely in the last several months. After climbing back from a bailout by the U.S. government, the company had its stock re-listed in mid-November. Here’s what Mike Cintolo had to say about it in a recent issue of Cabot Top Ten Weekly:
“General Motors may trace its roots back more than a century, but all for intents and purposes it’s an entirely new company (albeit a very large one, with about $140 billion in annual revenue). Gone are the Saturn, Saab, Pontiac and Hummer brands, as well as loads of debt and some commitments to the union. And being combined with that leaner corporate structure is a big pickup in business as the auto sector recovers from the Great Recession (annual auto sales dipped to their lowest level in 30 years in early 2009); sales for GM’s core brands were up a big 16% in the month of December, and management expects sales to continue to chug along this year. We also like the recent news that GM will be selling its OnStar system at retail, for installation in any car, a smart move. Earnings are expected to reach $4.20 in 2011, up from less than $3 last year, but even that projection could be mightily conservative as any spike in sales is likely to fall right to the bottom line. We think this is a big turnaround story with legs.
“GM came public in mid-November and proceeded to etch a tight six-week IPO structure between 33 and 36. The breakout came during the last week of 2010, and the buyers haven’t let up since-shares have advanced nine days in a row on big volume as institutional investors built positions. Is GM going to double or triple from here during the next couple of months? Almost certainly not. But we think big investors will be accumulating shares on any weakness as business improves.”
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In this week’s Stock Market Analysis Video, Cabot Market Letter Editor Mike Cintolo says that from a top down perspective, not much has changed with the market as the indexes remain in firm uptrends. He says that the real story is underneath the surface and lies with the big-cap growth leaders. Stocks discussed include Priceline.com (PCLN), OpenTable (OPEN), Google (GOOG), Las Vegas Sands (LVS), Amazon (AMZN), Brigham Exploration (BEXP), Continental Resources (CLR) and Caterpillar (CAT). Click to watch the video!
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In case you didn’t get a chance to read all the issues of Cabot Wealth Advisory this week and want to catch up on any investing and stock tips you might have missed, there are links below to each issue.
Cabot Wealth Advisory 1/10/11 - The Rise and Fall of the Oil Industry
On Monday, Timothy Lutts discussed the everlasting cycles of fear and greed based on a chart that tracks investor sentiment at various phases of bull and bear markets. Tim also discussed the history of the oil industry and a stock that’s poised to benefit from a shift away from fossil fuels. Featured stock: Polypore (PPO).
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Cabot Wealth Advisory 1/13/11 - Four Ways to Boost Yields and Returns
On Tuesday, Carla Pasternak of StreetAuthority discussed four ways you can boost yields and returns in your portfolio. She suggested looking beyond common stocks and knowing when to sell, among other ways.
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Cabot Wealth Advisory 1/11/11 - The Enormous Complexity of the China Story
On Thursday, Paul Goodwin discussed the enormous complexity of the Chinese story, from China’s suicide rate to the U.S. Consumer Product Safety Commission opening an office in Beijing. Paul also discussed the pleasure he finds in shoveling after two recent winter storms. And Paul finished by discussing a global beverage company that’s based in Brazil. Featured stocks: Ambev (ABV).