Friday, January 9, 2009

Shoppers Drug Mart 2

Today I want to review Shoppers Drug Mart stock (TSX-SC) to see what analysts are saying about it. First, I want to say that this stock has done great since it has become a public company. However, it is in the Consumer Staple sub-index of the TSX. My experience has been that these companies can do great and then flame out for a while. Examples are Loblaw, which started to have problems in 2005, and Jean Coutu, which started to have problems in 2006. Before 2005/2006, these were great companies to own. This is a reason that I put this stock in my new Tax Free Savings Account. When it gets into problems, I can easily sell it.

A contrast is with stocks in my Canadian Trading account. I try to put stocks in there that I may never have to sell. If I have to sell something from this account, I have to plan carefully tax wise because if you sell stocks from a Trading Account, you are liable for tax on the increase in value of the stock. For example, my ABC (adjusted cost basis) for BCE was $5.42 because I bought it in the 1970’s. If the buy out went through at $42.75, I would have a big tax liability for the capital gains I had earned.

One negative I see on this stock (Shoppers Drug Mart) is there is lots of insider selling. However, there have been some senior management changes and the selling seems to be by the outgoing senior management. As I have said before, insider buying is because the insiders have confidence in their company, but insider selling can occur for lots of reasons.

For this stock, there are lots of Strong Buys ratings, a few Buy ratings and some Hold ratings. The mean rating would be a Buy. (See my site for information on analyst ratings.) No one expects this stock to do badly in 2008 or 2009, as far as financials go. However, it is uncertain when this stock might recover and take off again. This is mainly because it is uncertain when the current financial crisis might be over.

Shoppers’ is a licensor of Shoppers Drug Mart in Canada and Pharmaprix in Quebec. The company owns and operates Shoppers Home Health Care stores. It also owns MediSystem Technologies Inc. Inc. and the new Murale Stores. Its web site is See my spreadsheet at I have reloaded my spreadsheet with figures from the 3rd quarterly report of October 4, 2008.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website at for a list of the stocks for which I have put up spreadsheets on my web site.

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