Time to Take Profits With Walgreen Company (WAG)?

Walgreen Company (NYSE:WAG) has had a very good 2013–up over 30% in market value–as it has won back a significant amount of its customers from the Express Scripts saga. Interestingly, it may be time to take some profits with the drug retailer; or at least that’s what the smart money is doing. Why pay attention?

In the eyes of many investors, hedge funds are seen as bloated, old financial vehicles of an era lost to time. Although there are In excess of 8,000 hedge funds trading today, Insider Monkey looks at the leaders of this group, about 525 funds. Analysts calculate that this group oversees most of the smart money’s total capital, and by tracking their highest quality equity investments, we’ve revealed a few investment strategies that have historically outperformed the broader indices. Our small-cap hedge fund strategy beat the S&P 500 index by 18 percentage points a year for a decade in our back tests, and since we’ve started sharing our picks with our subscribers at the end of August 2012, we have outpaced the S&P 500 index by 33 percentage points in 11 months (find the details here).

Just as crucial, bullish insider trading sentiment is a second way to analyze the financial markets. There are lots of motivations for an upper level exec to downsize shares of his or her company, but just one, very simple reason why they would buy. Various empirical studies have demonstrated the impressive potential of this tactic if piggybackers understand what to do (learn more here).

Keeping this in mind, it’s important to discuss the recent info surrounding Walgreen Company (NYSE:WAG).

Hedge fund activity in Walgreen Company (NYSE:WAG)

At the end of the second quarter, a total of 41 of the hedge funds we track were bullish in this stock, a change of -21% from the first quarter. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were increasing their holdings substantially.

According to our 13F database, Glenview Capital, managed by Larry Robbins, holds the most valuable position in Walgreen Company (NYSE:WAG). Glenview Capital has a $334.9 million position in the stock, comprising 3.1% of its 13F portfolio. On Glenview Capital’s heels is William B. Gray of Orbis Investment Management, with a $263.5 million position; the fund has 2.1% of its 13F portfolio invested in the stock. Remaining peers that hold long positions include Peter Adam Hochfelder’s Brahman Capital, and Robert Rodriguez and Steven Romick’s First Pacific Advisors LLC.

Because Walgreen Company (NYSE:WAG) has witnessed bearish sentiment from upper-tier hedge fund managers, it’s safe to say that there is a sect of fund managers who were dropping their full holdings last quarter. Intriguingly, Arthur B Cohen and Joseph Healey’s Healthcor Management LP dumped the largest investment of all the hedgies we watch, totaling about $57.2 million in stock. Michael Messner’s fund, Seminole Capital (Investment Mgmt), also said goodbye to its stock, about $47 million worth. These transactions are interesting, as total hedge fund interest dropped by 11 funds last quarter.

Insider trading activity in Walgreen Company (NYSE:WAG)

Legal insider trading, particularly when it’s bullish, is at its handiest when the company we’re looking at has seen transactions within the past 180 days. Over the last half-year time period, Walgreen Company (NYSE:WAG) has experienced 1 unique insiders purchasing, and 4 insider sales (see the details of insider trades here).

We’ll go over the relationship between both of these indicators in other stocks similar to Walgreen Company (NYSE:WAG). These stocks are PharMerica Corporation (NYSE:PMC), BioScrip Inc. (NASDAQ:BIOS), Rite Aid Corporation (NYSE:RAD), GNC Holdings Inc (NYSE:GNC), and CVS Caremark Corporation (NYSE:CVS). All of these stocks are in the drug stores industry and their market caps resemble WAG’s market cap.

Using the results explained by the previously mentioned strategies, regular investors must always track hedge fund and insider trading activity, and Walgreen Company (NYSE:WAG) applies perfectly to this mantra.

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