Walgreens Boots Alliance - Misdiagnosing Amazon?
Capital Thinking • Issue #145 • View online
My firm spent a lot of time thinking about pharmacies when we were analyzing investments in McKesson and other drug distributors.
We struggled with a question: How will the retail pharmaceutical industry look in the future?
Or more precisely, how will Amazon’s entrance into the retail pharmacy business change this industry?
Our inability to answer this question kept us away from retail pharmacies. Then we had a small but important insight that shifted our thinking on Walgreens Boots Alliance.
The preponderance of drugs in the U.S. is consumed by an older population, whose habits change slowly or not at all.
Accordingly, it’s likely that Amazon’s online pharmacy will not significantly impact the existing drug industry.
Companies everywhere, in every business, are paranoid about Amazon.com. This sort of paranoia is healthy for the long-term well-being of our investment portfolio, as it is creating interesting buying opportunities.
A case in point: My firm spent a lot of time thinking about pharmacies when we were analyzing investments in McKesson and other drug distributors.
We struggled with a question: How will the retail pharmaceutical industry look in the future? Or more precisely, how will Amazon’s entrance into the retail pharmacy business change this industry?
Our inability to answer this question kept us away from retail pharmacies. Then we had a small but important insight that shifted our thinking on Walgreens Boots Alliance.
The preponderance of drugs in the U.S. is consumed by an older population, whose habits change slowly or not at all. Accordingly, it’s likely that Amazon’s online pharmacy will not significantly impact the existing drug industry.
I’ve made this point before, but it is important to repeat: 10 years ago Amazon was not taken too seriously. Giants like Google, now Alphabet, and Microsoft ignored Amazon’s entry into cloud hosting, thinking “What does a bookseller know about the cloud?”
They have regretted it ever since.
Here’s why: Read More from Contrarian Edge ==>
*Feature post photo by Paula May on Unsplash