EXCLUSIVE Tom Gayner Interview

Insider Monkey: You also were buying some Walgreen Company (NYSE:WAG) in the third quarter of the year.  Did you do anything different there because so much of the returns, at least from our perspective, depend on the Express Scripts situation?

Tom Gayner: I don’t agree with that particular analysis.  That would be helpful and how that all plays out will influence the returns but I don’t think it will dominate the returns.  I mean, there’s a case where we review those four points, they’re demonstrably successful with good returns on capital, not just for the last year or two for the last 30 or 40 years. The management team is honest and talented.  The capital allocation decisions in terms of the increased dividends, share repurchases and the big fundamental business decisions that they’re making, in terms of how they have dealt with the Express Scripts issue, the choice to do the alliances and business deals, all those sorts of things.  I think they are really smart and good people and the market is misunderstanding it.

Walgreens was in fact exactly the kind of opportunity I spoke of when I say I sit around and say, “I don’t have any ideas, I don’t have any ideas,” and sometimes something drops out of the sky and Walgreens was one of them.  The market marked down that price, in consequence I started- I had a general awareness of the company but ended up doing a lot more work and thinking about it much more deeply and came to the conclusion that it is going to be a really good idea in good circumstances over the fullness of time.  So, we bought the stock.

Insider Monkey: We’ve been talking a lot about buying in these last few questions, and you are a longer term investor, but how do you come to a decision that it’s a good time to sell?

Tom Gayner: Two things; one, if I find out that I was wrong about my thesis as to why I thought it was a good idea.  The best thing to do is to admit you’re wrong and sell it and move on.  That happens from time to time.  The other thing is we do have a finite amount of capital and we don’t try to turn things over a lot, as you correctly pointed out, but as a spectacular idea comes along and we have only limited funds to buy it, well then it should also be compared against everything we already own to see whether it’s appropriate to shift capital from one use to another.