In this episode of the Left Brain Thinking podcast, host Chuck Jaffe interviews Nolan Langford, CEO of Left Brain Investment Research, about healthcare investing with a focus on Rite Aid Corp. Langford explains Rite Aid’s recent turnaround, driven by a post‑Walgreens transaction, a new CEO, and the pharmacy‑benefit business, which together have restored profitability. Left Brain evaluates the company at the enterprise level, looking at both equity and debt. The firm highlights a secured 2026 Rite Aid bond (8% coupon, trading slightly above par) that offers an estimated 6.5% yield‑to‑maturity and a total return of about 6.5% when held to maturity, emphasizing total‑return over purchase price. The conversation then shifts to another income security, Hercules Technology Corp (HTGC), a business‑development company that lends to life‑science firms and offers an 8%+ dividend yield. Throughout, Langford stresses Left Brain’s investment philosophy of seeking companies that can double in 2‑3 years while also targeting high‑yield bonds with price‑appreciation potential. The episode concludes with standard disclosures and promotional information about Left Brain’s research services and upcoming events.
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Welcome to Left Brain Thinking, where creative investment ideas meet logical analysis. That's the hallmark of Left Brain Investment Research, where the analysts are looking for growth companies with the potential to double in 2 to 3 years and high-yield bonds with the potential for dramatic price appreciation. Today we're talking about healthcare investing and the recovery of Rite Aid Corp and more with Nolan Langford. He's the chief executive officer at Left Brain Investment Research. You can learn more about the firm at leftbrainir.com and on Twitter @leftbrainir. Nolan Langford, great to chat with you again.
Thank you, Chuck. Look forward to talking healthcare and looking forward to starting our time away from being quarantined. It's nice to actually see people out and about.
It is, and it's a very interesting time when it comes to healthcare investing right now. In part because of that, because of course the story for a while has been COVID, nothing else but COVID, but the story going forward is not nearly so much COVID. That's part of the interest for you, right?
That would be correct. Here we have actually an, just sort of an individual story on an individual name, certainly helped by COVID. Rite Aid itself has been around for a very long time. Traditional business that has a front-end retail store and in the back end they fill prescriptions. That business had been challenged as traditional brick and mortar had been under pressure, but Rite Aid started its own turnaround several years ago after its failed merger attempt with Walgreens that actually was nixed by regulators. But it was pretty interesting. They ended up doing another financial transaction where they took their worst performing stores, sold those to Walgreens, took an injection of cash, paid down some debt, and that really started them on the road to the transformation recently been helped or aided by COVID.
Is your interest in Rite Aid, because at Left Brain you're looking at both the equity and the bond side, is your Is your interest in Rite Aid at the stock level, ticker RAD, or is it at the bond level?
That's interesting. We generally, Chuck, start with the enterprise level. And what history shows us, it's unbelievable how much money that you can make when things go from worse to less worse. And that's the case here, Rite Aid. And again, it started after the Walgreens transaction a couple of years ago. But then right after, they brought in a new CEO, Hayward Dunnigan, and really focused— Hayward did— on the pharmacy benefit part of the business to really help drive the turnaround. So the turnaround was already in process. The financial part happened a few years ago. The operational part with the new CEO which was benefited obviously by COVID, but the pharmacy benefit business, Envision, they got into a few years ago, had already been bearing fruit. And so this latest set of circumstances really helped, and it's driven the entire business or enterprise to a higher value. And that is both on the bond side as well as the stock side. Our director of research, Brian, wrote up the stock Actually, it was less than 5 months ago. And since then, he wrote up the enterprise, recommended a bond that I'm going to talk about now. But since then, the stock price has actually doubled. So the entire enterprise has gotten more valuable and most of that has fallen to the equity.
So the specific issue that you're interested in is what?
Earlier, just like a lot of corporations with interest rates being really, really low, Rite Aid did a bond exchange or refinance. And what they issued, now that business is better for them, is a new bond. It's a secured bond, but it matures in 2026, and it has an 8% coupon. And it's a bond that at this price we like a lot, particularly because we're getting more comfortable with Rite Aid as an enterprise. And now they're actually showing profits. So we're very comfortable with this business and the security.
When you're talking about bonds, you know, you've got the rate of return you're expecting here. I mean, obviously, if you're happy with the company, you expect that you're going to wind up getting what you want out of it. So this is a case where you're locking it in. And I'm sorry, you said again, this bond is for how long?
So this is a 2026 bond, November 15th. Is the bond maturity for the bond that we've highlighted. It's an 8% coupon. I'll remind all of our left brain listeners, this was a focus bond for us in our chosen list back in February. This was on our income securities list. But it's an 8% Rite Aid bond. The maturity is November 15, 2026. Right now, that bond could be purchased at a little over par, so a little over 100, anywhere between 102 and 105. And if you hold it to maturity, an investor is likely to get about 6.5% is roughly what the yield to maturity would be if purchased at somewhere around 104, which is around the last trade price we've seen on it.
And we should point out, because of the growth that you're looking for, you don't worry about purchasing bonds above par. I mean, you don't want them to be way above par, but where some folks might say, hey, I need to be getting a bond at par or below. For you, you're not looking at the purchase price, you're looking at the growth potential, correct?
Yeah, we're looking at total return. So remember the interest rate or the coupon or the payment that an investor is going to receive is that 8%. So for every $10,000 in base value, the investor is going to get about $800 in annual income. And they will get that over the life of the bond. So about the next 5.5 years roughly. And even at purchase at today, at the 104 they purchased today, they still get that $800 coupon at $10,000. You know, again, if they bought it today, it would be $10,400 for the bond and they would get that $800 interest payment over the next 5.5 years. And then at the maturity, the investor would get their $10,000 back. So if you do all that math, it totals about a 6.5% total return over the life of the investment.
Now I know Rite Aid bonds are not the only income securities you're interested in. We've got a little bit of extra time. What's something else that stands out to you right now?
Well, from a healthcare standpoint, Rite Aid is the one that, that really stands out. There's another income security though that we do follow. That we really like a lot. The ticker is H like Harry, T like Tom, G like George, C like Carl, Hercules Technology Corp. And basically what they are is a lender to the life science industry. So if you're doing drug discovery or biotech, it's pretty much a risky endeavor. Getting equity investors or stock investors may be tough. but you still need to finance the discovery. Hercules Technology Group, HTGC, they've been in the business for decades of lending exclusively to this area. And so it's a business development company, has a stock that trades on an exchange, it pays a quarterly dividend, and we have it written up. Again, this was on one of our chosen lists earlier this year, but it's on our income securities list. And the yield on it is over 8% per year. That's another one in the healthcare space that pays a good income that we really like right now.
So again, it is HTGC, Hercules Capital. That gives us a great take on that. Plus we had Rite Aid, really interesting stuff. Nolan Langford, thanks so much for joining me to talk about it.
Have a wonderful week and stay safe.
Left Brain Thinking is a joint production of Left Brain Investment Research and Money Life with Chuck Jaffe. Our conversations are not personalized investment recommendations, but are designed to engage your brain. Please do your diligence before making any financial transaction. I'm your host, Chuck Jaffe, and you can learn more about my weekday podcast at moneylife show.com. Thanks to my guest, Nolan Langford, chief executive at Left Brain Investment Research. Learn more about the firm and its analysis at leftbrainir.com, and go there for details on the Fortune Makers Zoom event scheduled for April 8th, featuring Life Changers, stocks that the firm believes can gain 50 to 100% from current prices. They're on Twitter @LeftBrainIR. Left Brain Thinking is available every Wednesday. Please subscribe on your favorite podcast app and plan to put your left brain thinking cap on every week. Until next Wednesday, stay safe, everybody.
