Joe Costigan, Director of Equity Research at Bryn Mawr Trust Company, says Walgreen Company (WAG) is performing in an area with secular growth that’s been the result of three factors.
“First, America is aging, and as people age they tend to consume more health care. Second, health care in general has moved over the last 10 years or has incorporated more lifestyle or patient-optional medications; and lastly, there has been a consolidation in retail pharmacy,” Costigan said.
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As smaller players find it harder to compete, Costigan says that retailers such as Walgreens are able to grow at others’ expense. He also adds that while his firm was initially invested in CVS Caremark Corporation (CVS), it found that Walgreens had a much more attractive valuation.
“We looked at Walgreens three years ago when we actually owned CVS, and we realized that the valuation of Walgreens was significantly more attractive than CVS, so we bought Walgreens. It’s been one of our better performers, in part because of the secular demographic trends but also in large part because of our valuation work,” Costigan said.
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