Buy Or Sell? Institutional Activity Update on Walgreens Boots Alliance, Inc. (NASDAQ:WBA)

According to the latest SEC Filings, firms & funds owning shares of Walgreens Boots Alliance, Inc. (NASDAQ:WBA) have decreased their positions by -5.37%.  Institutions now own 62.20% of the company.

Big organizations that control vast sums of money, such as mutual funds, insurance companies or pension funds, that buy securities are known as “institutional investors”.  Unlike individual investors, institutional investors trade in massive blocks of 10,000 or more shares per transaction.  The sheer size of these trades significantly affect the price of a share. 

PROS AND CONS

Peter Lynch says in his best-selling book, “One Up on Wall Street”, that institutional ownership is a negative thing.  “Institutions don’t own it and the analysts don’t follow it”.  He favors the stocks that big investment groups pass on because he feels that these stocks are undervalued.  In contrast, Investor’s Business Daily’s William O’Neil thinks that institutional investors are important to driving up stock prices because they provide the largest source of demand for stocks.  O’Neil argues that if a stock has no institutional ownership, it means they have already passed on it.  He regards institutional ownership as a desirable stock trait in his book, “How to Make Money in Stocks”. 

Investors often look favorably upon stocks who have a large amount of institutional ownership.  These large companies often employ a team of analysts to perform financial research before purchasing a large block of stock, making their decisions influential in the eyes of other investors.

Due to the financial commitment that these companies make into research, these institutions aren’t quick to sell off their shares.  But when they do, however, it can drive down the price. 

TECHNICAL ANALYSIS

Technical analysts have little regard for the value of a company. They use historic price data to observe stock price patterns to predict the direction of that price going forward.  Analysts use common formulas and ratios to accomplish this.

Walgreens Boots Alliance, Inc. (NASDAQ:WBA)’s RSI (Relative Strength Index) is 56.51.  RSI is a technical indicator of price momentum, comparing the size of recent gains to the size of recent losses and establishes oversold and overbought positions.

FUNDAMENTAL ANALYSIS

Fundamental analysis examines the financial elements of a company, for example; sales, cash flow, profit and balance sheet.  These numbers are then crunched to create theoretical valuations of companies. 

Earnings Per Share (EPS) is the earnings made by a company divided by their number of shares.  EPS enables the earnings of a company to easily be compared to their competitors. The higher the number, the more profit per dollar is being made on investor capital.  Walgreens Boots Alliance, Inc.’s EPS is 3.78.  Their EPS should be compared to other companies in the Services sector.

Price-to-Earnings Ratio is the current share price divided by annual earnings per share.  P/E provides a number that details how many years of earnings it will take a stock to recoup the value of one share at current price levels.  Easy to calculate and understand, P/E is an extremely common ratio that is used to compare valuations of stocks against each other relatively.  Walgreens Boots Alliance, Inc.’s  P/E ratio is 19.13. 

Projected Earnings Growth (PEG) is a forward looking ratio based on anticipated earnings growth.  PEG is created by dividing P/E by the projected rate of earnings growth.  Walgreens Boots Alliance, Inc.’s  PEG is 1.24.

RETURNS AND RECOMMENDATION

Shareholders can expect a return on equity of 13.90%.  Calculated by dividing Walgreens Boots Alliance, Inc.’s annual earnings by its total assets, investors will note a return on assets of 5.70%.  Finally, Walgreens Boots Alliance, Inc.’s return on investment stands at 11.90% when you divide the shareholder’s return by the cost.  The consensus analysts recommendation at this point stands at 2.20 for Walgreens Boots Alliance, Inc. (NASDAQ:WBA).  This is based on a 1-5 scale where 1 indicates a Strong Buy and 5 a Strong Sell.

Disclaimer: The views, opinions, and information expressed in this article are those of the authors and do not necessarily reflect the official policy or position of any company stakeholders, financial professionals, or analysts. Examples of analysis performed within this article are only examples. They should not be utilized to make stock portfolio or financial decisions as they are based only on limited and open source information. Assumptions made within the analysis are not reflective of the position of any analysts or financial professionals.

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