CVS Health Corp (CVS)

(A Top Pick June 27/17 Up 2%) He no longer owns this as it did not perform as they had expected. It has become a pharmacy that merged with Aetna – now he does not know what the company strategy is going forward.

(A Top Pick June 22/17 - Down 3%.) Still believe in it. They bought Aetna and that brought some issues with debt and integration. He thinks that they will start to execute well.

The Amazon.com (AMZN-Q) scare affected the price of the stock. Trades at reasonable multiples. (Analysts’ price target is $85.95)

Eighteen percent of GDP goes to health in the United States, compared to 11% in Canada. CVS is trying to be a health solution to the US population and is well positioned to do it. Their purchase of Aetna gives them a large and strong insurance component. Caremark is a pharmacy benefits manager that gives them buying power with the drug companies and enables them to price their insurance favorably. They have 10,000 storefronts, a store within 3 miles of 70% of the population. CVS has been beaten down out of a fear that Amazon would take the business, but it is a large company of seasoned professionals in a highly regulated industry. They are not going to roll over for Amazon. Yield 2.7%. (Analysts’ price target is $85.95)

Really likes. He’s doubled down. There is headline risk with the Aetna deal still ongoing, the Amazon effect, and US rhetoric about decreasing drug costs. Underlying earnings trend is strong. At a great level now. Over next year or two should tick back up.

She has owned this for a number of years. They operate a large pharmacy stores. They are buying a health insurance company. Amazon may be a threat but CVS have their own direct delivery service. They reported today and had a good quarter. This industry is evolving and have to monitor it closely. They are well positioned to compete.

He is negative on the space of drug distributors and pharmacy benefits managers. He thinks that policy pressures and pricing pressures make the PBM side of CVS a bad investment. The unrelenting pressure is driving more business to United Health, which is very efficient. Going top down: He doesn’t like consumer staples at this time and within that he doesn’t like distributors, and within that is all the difficulty in distribution of pharma. He thinks they’ve make good strides improving the retail, but the back end will be very tough for a long time. He would recommend cutting losses for someone who owns this and investing in medical devices or in a more general healthcare ETF. (Analysts’ price target is $85.47)

They are one of the largest pharma distributor in the US. Their recent acquisition is a plan to position the company in health management – helping companies send orders to pharmacies. The company is one they are looking into. The stock is trading at a reasonable valuation and it generates good cash flow. The debt load is not onerous. They are here to stay. (Analysts’ price target is $86)

He has been recommending this for a while, buying a company at less than 9 times earnings. A really good business at a discounted price right now. The headwinds of the headline risk against pharma has played out. A strong buy for the next 5 years investment horizon.

(A Top Pick May 1/17 - Down 19%) Still like it. A health company that went through a vertical integration buying Aetna. Not expensive on a cash flow basis. Amazon.com Inc. (AMZN-O) purchase of Pill Pack affected the stock.

Shorter term the fact that Amazon said it is entering the space affects sentiment. He still doesn’t like the retail noise. He prefers United Health Group (UNH-N). (Analysts’ price target is $85.40)

Amazon is trying to work their way into the health industry and this is directly impacting this company. We don’t know how it will impact CVS in the long term, but the short term fear is creating headwinds. Overall, a good business, but he would wait to see what happens.

Model price is $83.03. The stock is at $70.50 today. CVS bottomed out. He expects the high to be about $87. However, any time Amazon can announce again that it is going into the pharma business, CVS will drop. Its downside risk is about $63.60 and he would buy at that price. (Analysts’ price target is $50.41)

He bought some this year. The first time in a while. It is cheap. They are trying to diversify across verticals. Their acquisition needs approval so the stock is stuck.

He bought some this year. The first time in a while. It is cheap. They are trying to diversify across verticals. Their acquisition needs approval so the stock is stuck.