Investing in Walgreens through BlackRock

By Robert F. Abbott, author of Big Macs & Our Pensions: Who Gets McDonald's Profits? the book that explains the connection between the retirement income of the middle class and the profits of big business

Wednesday, March 26, 2014 

What's New in Middle Class Ownership of Big Business 

If you invest in mutual funds or ETFs, you likely know whether or not you invest through BlackRock. But, there's a possibility you may invest through BlackRock, without knowing, through a pension fund.

BlackRock manages investments for many pension funds and other institutional investors. Generally, we would expect smaller funds to use BlackRock, since they would not have enough capital to justify hiring their own professionals.

So in addition to investing on behalf of more than 800 mutual funds, this company also manages (invests) on behalf of pension funds, financial institutions, and even governments.

Hopefully, this gives you some context when I tell you that people and organizations that invest through BlackRock owned almost 5 and three-quarter million shares of Walgreens at year-end 2013. No doubt that's spread out among many millions of different people who invest through mutual funds, ETFs, or pension funds.

If you belong to that group, you had a reasonably good news when Walgreens announced its first quarter 2014 earnings yesterday, and even better news when you saw how the market took the report.

Walgreens announced earnings of 91 cents a share, down from 96 cents in the same quarter of last year, and two cents below analysts' consensus. At the same time, the company advised that sales had increased by 5.1% during the quarter. As a point of interest, prescriptions accounted for 62% of sales.

By the end of trading yesterday, the Walgreens stock price had risen $2.11 to $66.42, an increase of 3.28%. For BlackRock clients, that meant a gain on the day of just over $12 million. If only every day could be like that!

More than 65% of Walgreens belongs to institutional investors like BlackRock; at the end of 2013, 1,147 different institutionals owned a piece of the drugstore chain.

And, BlackRock itself is mostly owned by institutional investors: more than 88% at the end of 2013.

For more connections between working, middle class people and the world's biggest corporations, please visit our archives.

The Bigger Picture:

Will Profits from Big Macs Add to Your Retirement Income?

In 1948, the McDonald brothers redesigned and remodelled their drive-in restaurant in San Bernardino, California. Taking inspiration from Henry Ford's assembly-line, they created the fast food revolution, with the quick service and low prices we now take for granted.

In that same year, the U.S. National Labor Relations Board ruled unions could include pension issues in contract negotiations. That ignited a massive expansion of pension plans.

In the 1950s, pension funds started buying stocks, rather than just bonds or their equivalents; in addition mutual funds came of age. With these two developments working, middle class people became owners of big business. At first, their stakes were modest, but steadily growing.

And in just a few decades, they gained controlling interests in many large corporations through their funds. Management guru Peter Drucker has called it, "...one of the most startling power shifts in economic history."

Now, working people reap the benefits of those investments, collecting much of the profit distributed by McDonald's and other big corporations.

Discover how the pieces fit together. In Big Macs & Our Pensions: Who Gets McDonald's Profits? - a new booklet -(about 25-pages), you will:

• learn more about the McDonald's transformation and its implications for the future
  
• find out how McDonald's makes its profits (and it involves more than selling Quarter Pounders)
  
• meet some of the working people who get McDonald's profits through their pension and mutual funds
  
• find out how low wages became embedded in the fast food industry
  
• hear accusations from critics of McDonald's wages, and
  
• learn who has the ultimate say on fast food wages (the answer may surprise you).

You may not be among the owners of McDonald's. But if you belong to any pension plan, or contribute to a mutual fund or whole life insurance policy, you likely own pieces of some big corporations.

More importantly, though, your retirement income will be bigger and grow more dependably than you would otherwise expect.

Big Macs & Our Pensions: Who Gets McDonald's Profits? is now available at Amazon.com