CVS Health Corp (CVS)

He's been hard on this name. He's steered away from consumer staples, a bad neighbourhood. Its retail end has done OK due to consistent demand, but its pharmacy side has struggled. Generic drug pricing pressure is merely one factor. Its dividend isn't enough to make him buy. He could see a pullback when rates rise; inflation hurts bond proxies like this.

This will reward patient investors. A highly-disrupted business, having just bought insurer Aetna for vertical integration. They are redefining themselves by locating a store within 3 miles of 80% of the US population, a population that now must take care of chronic ailments, like diabetes. So, this proximity to customers is efficient and profitable. Trading at 11x earnings with good cash flow despite current debt levels. Also likes competitor Walgreens.

He thinks as a value investor you have to be careful. However, he thinks $59.82 would be a great buy price. He would wait until a pullback and sees $88 as a target.

(At the time of this comment, Aetna holders have just approved the deal with CVS.) This is a very large company. It’s underperforming most other large companies. It hit a solid bottom of about $66 and so it’s at a good buy point, $68, at the low end of its range. Volume is not terrific. You definitely want to get out if it falls below $66. If you buy this now, the first expectations would be a $4 gain, with potential rise of another $5 to $6. (Analysts’ price target is 80.21$)

CVS Health Corp (CVS-N) vs Walgreen Boots Alliance (WBA-O) or stay out of health care? He prefers Walgreen between the two, due to their Rite Aid acquisition. They feel that a safer option is AmerisourceBergen (ABC-N) as they are more on the distribution side. (Analysts’ price target is $89)

(A Top Pick Feb. 16/17, Down 12%) Sold his shares last summer. Too much regulatory uncertainty and risk. more than he bargained for. Likes home healthcare, but the regulatory risk turns him off. Amazon going into the space scares the hell out of everyone, doesn't it?

A lot of pressure from Amazon getting into CVS' space, but confident CVS will emerge well. CVS will fight back. But don't get too speculative on events (Amazon) that could happen. ROIC consistent. Good valuation. He has faith in CVS.

It is not like Shoppers Drug Mart like some people believe it is. They are more an integrated health care company rather than retail. Some of the issues they had with the CVS part of the business have stabilized. It makes sense in the Health Care space to be vertically integrated. Over the long run is going to do well particularly if they integrate ETNA well. On top of that the tax cuts will help them as they are mostly domestic (Analysts' price target $89).

The thing with this, as we have seen with a lot of stocks, is the Amazon factor. If you don't own Amazon, you are kind of behind the curve because it has done so well. However, on the flipside, if you own anything that Amazon is remotely touching, you are going to get penalized. This company falls into that category. It screens great on any kind of a value metric, but there is this huge overhang in the industry. She doesn't want to own anything that is even remotely spoken about that has an Amazon connection.

The acquisition is a big one and because of the size there is some fear they can’t get it done. There is more risk to this deal than normal. It is in no man’s land otherwise. It has not got strong price momentum, but has a good balance sheet.

About 2 or 3 months ago, this got hit by the Amazon affect, and the stock fell to $66, and is now at $79. This has a positive transit of EBV +3, which is a Buy signal. His model price is $100.70, 27% upside. A good price if you are looking at buying this.

Just made the acquisition of Aetna, which is still pending approval. There is a consistency of the business and they're spinning off an incredible amount of free cash flow and buying back a ton of stock. Had a bit of volatility through the end of the year, because of an article regarding Aetna and the multiple they were going to have to pay. There was also concern about Amazon (AMZN-Q) entering the pharmacy space. This is inexpensive relative to the rest of the market, trading at 12X earnings. Dividend yield of 2.5%. (Analysts' price target is $88.)

Had owned this, but sold it to buy something else. They are going to have a big benefit from tax reform, although they acquired Aetna. That is going to really transform them. It is no longer going to be a retailer and a pharmaceutical benefits manager, it is also going to have healthcare plans. Taking on a lot of debt to make the acquisition and there is no guarantee of success. Although it looks cheap, it is not one he is excited about getting into at the moment.

Partly a drugstore, partly a long-term health care business and partly a pharmaceutical benefits business. The stock has about a 7% free cash flow yield and a 2.7% dividend yield. Trading at about 11X earnings. They just bought Aetna and vertically integrating the company. It's not about selling drugs and drug store stuff or having fees for services, it is much more about being a healthcare company. They may have to do an equity issue which makes a lot of sense. This makes it a company that Amazon (AMZ-Q) would be hard to compete with. (Analysts' price target is $85.50.)

(A Top Pick Dec 19/16. Down 7%.) People are afraid Amazon is going to come in and take their space. That is unlikely to happen. They have 10,000 locations in the US along with 1600 in Target stores and 1200 in mini-clinics. A wonderful platform to capture the patient experience, which is exactly what they are trying to do.