We recently published a list of 10 Oversold Value Stocks To Buy Right Now. In this article, we are going to take a look at where Walgreens Boots Alliance, Inc. (NASDAQ:WBA) stands against the other oversold value stocks.
After Trump’s victory in the presidential election, US stocks surged to record highs. Much of the stock market’s history reveals that value stocks have outperformed their growthier counterparts but the trend has reversed over the last decade. With mega-sized technology stocks especially those driven by AI dominating, the reverse trend intensified. It is important to consider that the Morningstar US Large Growth Index has returned 258% and the Morningstar US Large Value Index has returned 148% in the last decade, reflecting a significant difference.
Growth stocks looked unstoppable until a week in July when the Morningstar growth index fell 3.97% while the value index climbed 3.39%. This was when the investors were confident about the interest rate cuts that were to be executed in the later part of the year. Thus, it looked like they shifted their focus from big tech to more underperforming sectors.
Over the next year, the outlook for value stocks looks bright as concluded by Bankrate’s quarterly Market Mavens Survey. The survey revealed that experts see value-priced equities outperforming over the next four quarters. 42% of respondents preferred value stocks to growth stock over the next year while 33% think returns will be about the same.
When leading investing professionals were asked whether value stocks or growth stocks would offer greater returns over the next year, they put forward different reasons for their preferences. While the view regarding value outperforming growth at the start of a rate-cutting cycle was noticed in the responses, one of the experts inclined towards value stocks by stating:
“If the Fed is cutting rates because the economy is faltering, market participants are apt to seek out the best growth opportunities in a weakening growth environment. However, if economic growth holds up and rates come down, value would be the place to be for the best return prospects.”
Others were of the opinion that falling inflation and interest rates would benefit both classes equally.
A pharmacist discussing the health benefits of a prescription medication with a customer.
Our Methodology
In order to compile a list of the 10 oversold value stocks to buy right now, we first used a stock screener to identify value stocks that have fallen by at least 30% year-to-date and are trading at a forward P/E ratio under 15, as of November 22. We focused on companies trading in industries including consumer staples, financials, legacy healthcare, industrials, and materials. Finally, we ranked the stocks in ascending order of their hedge fund holders, as of Q3 data.
At Insider Monkey we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Walgreens Boots Alliance, Inc. (NASDAQ:WBA)
Year-to-Date Decline: 68.86%
Forward PE: 5.06
Number of Hedge Fund Holders: 33
Walgreens Boots Alliance, Inc. (NASDAQ:WBA) serves as an integrated healthcare, pharmacy, and retail leader. The firm is present in 8 countries with a portfolio of consumer brands including Walgreens, Boots, Duane Reade, the No7 Beauty Company, and Benavides in Mexico. Additionally, it has a portfolio of healthcare-focused investments in certain countries including the US and China. The firm’s three segments include U.S. Retail Pharmacy, International, and U.S. Healthcare.
The firm is the largest retail health, pharmacy, and daily living destination across the US and Europe. It plays a crucial role in the healthcare ecosystem as a trusted, global innovator in retail pharmacy with over 12,500 locations across the United States, Europe, and Latin America. WBA benefits from a retail pharmacy-led store model. It has over 8,000 stores of which the majority, approximately 6,000 are profitable, supporting the firm’s conviction in in a retail pharmacy-led model. The firm has earned a solid position of trust with millions of customers which is commendable.
In the fiscal fourth quarter, sales increased 6% year-over-year to $37.5 billion, reflecting sales growth across all segments. Sales in fiscal 2024 were $147.7 billion, an increase of 6.2% as compared to the prior-year period. As the firm moves into fiscal 2025, it is reorienting to its legacy strength as a retail pharmacy-led company by optimizing its footprint and controlling costs. The firm announced an accretive footprint optimization program that targets approximately 1,200 closures over the next three years, including approximately 500 closures in fiscal 2025.
Building on a heritage going back more than 170 years, Walgreens Boots Alliance, Inc. (NASDAQ:WBA) currently has strong market positions in Europe and Latin America. As the firm stabilizes its core retail pharmacy business, it remains positive about reaping consumer as well as financial benefits in the long run.
Overall, WBA ranks 6th on our list of oversold value stocks to buy right now. While we acknowledge the potential of WBA as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for a deeply undervalued AI stock that is more promising than WBA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.
Disclosure: None. This article is originally published at Insider Monkey.