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Blue Ridge Capital Lowered Its Position in Walgreens Boots Alliance

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Blue Ridge Capital lowered its position in Walgreens Boots Alliance

Blue Ridge’s position in Walgreens Boots Alliance (WBA) accounted for 4.23% of its 4Q14 portfolio, and was worth $348 million. The hedge fund reduced its position in the stock by 270,000 shares in the fourth quarter.

According to aggregated 13F data, 151 hedge funds closed their positions, while 457 lowered their positions in WBA in 4Q14.

Among those funds that reduced shares of WBA in their portfolio in 4Q14, in terms of dollar value invested, Blue Ridge Capital ranked seventh. Viking Global, JPMorgan Chase, FMR, and Deutsche Bank were other hedge funds that lowered their positions in WBA in the fourth quarter.

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WBA reported mixed 2Q15 results

WBA reported that net sales in the second quarter of 2015 increased by 35.5% to $26.6 billion. Q2 earnings increased by 21.6% to $1.18 per share. While earnings beat the analyst estimates of 95 cents, revenue fell short of estimates by $1.2 billion. WBA credited this growth in sales revenue to its merger with Alliance Boots earlier this year.

WBA’s executive vice chairman and acting CEO, Stefano Pessina, discussed the company’s major areas of focus moving forward: “The first area is improving the performance of our businesses worldwide with an emphasis on operations. Second, we will be refreshing and reinvesting in the stores of our Retail Pharmacy USA division to improve the customer experience and expand retail margins. Third, we are restructuring our cost base, with a focus primarily in the USA, to create a more efficient cost model and become a more agile company. Through these efforts, Walgreens Boots Alliance is determined to lead the way in our industry and be at the forefront of innovative, pharmacy-led health care.”

The share price of Walgreens Boots Alliance increased by almost 24% in 4Q14. Other companies in the industry include Omnicare (OCR) and CVS Health Corporation (CVS). Their share prices increased by 17% and 21%, respectively.

WBA’s performance versus benchmarks

From a portfolio management perspective, an allocation into a particular stock is inherently a bet that the stock will outperform the benchmarks that can be associated with measuring the stock’s performance.

As seen from the above graph, WBA has outperformed all of its benchmark indices, which is a potential reason why the hedge fund didn’t close its position in the stock, but just reduced it, despite its mixed results in 2Q15.

While Walgreens Boots Alliance and CVS have a 0.39% and 0.63% exposure to the SPDR S&P 500 ETF (SPY), respectively, Omnicare has a 0.44% exposure to the iShares Core S&P Mid-Cap ETF (IJH).

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