Real Client Managed Portfolio Memorandum s1

REAL CLIENT MANAGED PORTFOLIO MEMORANDUM

TO: RCMP Spring 2011 Class FROM: Kevin Chen, Daniel Glotzbach, Anjana Reddy, Darshil Shah DATE: April 7th , 2011 SUBJECT: Walgreens(WAG) Recommendation

Company Overview Walgreens is headquartered in Deerfield, Illinois, and is one of America’s largest retail pharmacy stores. It has 7,496 locations in 50 states across America and employs 238,000 people. Their three main business segments are Prescription drugs, Non Prescription drugs and General merchandise. Their core management team is very strong and is the driving force behind the growth of the company. Walgreens sells both national brands as well as their own private brands.

Strategy Walgreens earns its all its revenues from its three main business segments. The Company operates its businesses through several subsidiaries. Of the total retail stores they own 21% of them and 79% are leased out. The merchandise at the stores is procured from domestic as well as international suppliers. They have 14 distribution centers across America which send out the products to their respective stores. The company more recently this year bought drugs.com an online prescription based company and through this acquisition want to establish a presence in the online domain. The management is also looking at increasing the number of 24hrs stores so that they can compete with the regional mom and pop stores.

Current Position RCMP currently holds 500 shares of WAG common stock, which were bought on October 6th, 1999 at $25 per share. WAG is trading at $41.1 per share as of April 7th, 2011, which is an unrealized gain of 64.4%.

Recommendation Using a 12.8% discount rate, our DCF valuation is $42.15 per share. Factoring in our market multiples as well, we came up with a range between $39.65- $48.49. With WAG currently trading at $41.10 per share, we feel that the stock is fairly valued and recommend a HOLD on the existing 500 shares. Walgreens has a very good presence in the Midwest and is located in all the 50 states of the US. The retail pharmaceutical industry globally is very fragmented and there is no one big player in the market. Walgreens can expand internationally along with and there is a lot of growth also in the domestic market. The management team is strong and makes right decisions like the acquisition of Duane Reade thus positioning themselves strategically in the New York market. We feel confident holding our position in Walgreens for the foreseeable future.