Playing the Turnaround

Jim Cramer

07/24/08 - 02:37 PM EDT
I am going to add 100 shares of Walgreen (WAG: NYSE). The stock is down slightly today, and this is a good long-term turnaround story.

The stock is trading at 13.5 times earnings, is close to a five-year low and has underperformed the S&P by 20% in that time period. In other words, I think the bad news is in the stock. The company has finally realized that it needs to reduce square footage and focus on internal store execution. I think that as the company does this, it will be worth the wait. Typically, when companies have done this (Wal-Mart (WMT:NYSE) and McDonald's (MCD:NYSE) come to mind), it has led to better sales, productivity and earnings. I think this is a long-term idea that makes sense to buy, especially because it is somewhat immune to the economy. After my purchase, I will own 1,300 shares of WAG, or 1.38% of the portfolio.