CVS Health Corp (CVS)

Is down with the Wal-Mart warning. There are only the two drug store chains. These guys are going inside Target. It is buying back stock. He sees double digit growth as people grow older and Amazon cannot topple them as you require a druggist.

It is a great company in the sweet spot with a demographic trend of more and more people requiring pharma benefits. Most scripts are paid by insurance. He likes the management.

CVS (CVS-N) or Walgreen (WBA-Q)? He owns both and they are both great opportunities. Demographically they are both in a sweet spot with the aging of the population and the need for prescription drugs. Couple that with Obama care, which mandates that people have insurance that will allow them to get those drugs. They just did a deal for Omnicare that provides long-term care for the elderly, and writes a ton of prescriptions. This trades at a couple of multiple points cheaper than Walgreen, and also its earnings predictability is a little bit higher, but he would own both.

CVS Health (CVS-N) or Walgreen Boots Alliance (WBA-Q)? These are so similar. They are both benefiting from similar trends. This has your pharmacy benefits manager. They are both benefiting from increasing drug usage and the whole story of the population getting older. You are getting some very good assets here and some very good secular growth over a number of years. Doesn’t think you will get hurt on either one.

Changing themselves so they are not just a pharmacy. They have become the largest provider of walk in clinics, replacing emergency rooms in the US. They are increasingly providing a big menu of ambulatory health services. They fill 25% of the prescriptions in the US and the biggest growth in spending in health care is in prescription medication. It is an interesting company. They just recently added it to their portfolio. CVS is really onto something, onto a trend and doing something that the other pharmacies haven't figured out yet. He is quite impressed by it.

(A Top Pick July 24/14. Up 41.79%.) Recently bought Omnicare, a provider of long-term care, which wrote over 100 million prescriptions last year. They have a demographic tailwind. Also, have new healthcare regulations in the US, which is making it easier. A great space to be in. Still a Buy.

The price has done very well, but the valuations are still very reasonable for a name like this. The Affordable Care Act is something that will benefit companies like this for a very, very long time. You can expect to see an increase in generic drug sales and specialty drugs as well. The recent acquisition of Omnicare (OCR-N) is very solid. They bought Target’s (TGT-N) 1,600 pharmacies, which will give them more exposure and scale with the ability of more purchasing power. 20X forward PE with a 14% long-term growth and 1.4 PEG ratio. Dividend yield of 1.33%.

A drug retailer in the US as well as having a PBM (Pharmacy Benefits Manager), where they go to employers and help them structure their benefit plans. The stock has done very well. She likes drug retail. PBM is very competitive and is all about lower costs, so you need scale. Fully valued here and she would want at least a 10% pullback. In this area, she would prefer the Canadian name, such as Loblaw’s (L-T).This one is on her watch list.

Pharma benefits management companies or pharmacy companies? Both of these spaces make a lot of sense. They have done very well. He owns CVS Health (CVS-N) which actually has a combination of the pharmacy and the Pharma benefits. He continues to like this name. Not expensive.

The 2^nd largest pharmacy chain in the US. Pharmacy Benefits Management is increasingly becoming very important. They negotiate drug prices on behalf of their customers, which are insurance companies, large corporations and government agencies. As drug prices are becoming more and more expensive, it is more and more important for these companies to negotiate for lower costs on drugs. This company has bargaining and negotiating power, and as a result their PBM business has the highest margin in the space. The 3 large companies are United Health, this company and Express Scripts, and they are consolidating. There is huge growth in the industry with the aging population. Over the next 5 years, prescriptions are growing from $100 billion to $400 billion. Yield of 1.35%.

They have both the back and front end of US drugstores. Back end contributes about 70% of revenues and profits. This is a play on the aging population demographics, plus Obama care. This gives a great many more Americans access to insured health benefits. Dividend yield of 1.35%.

This sort of straddles the world between his 2 favourite areas, consumer staples and healthcare. Trading at 20X estimated earnings at nearly an all-time high. The chart looks like it is going higher. If you are uncomfortable, step into it with perhaps a third or half position.

They are targeting how to generate traffic. They have the pharmacy benefits side which is seen as a competitive advantage. New money should get a better opportunity over the next little while.

They have a tailwind with the Obama care and increased health services in the US, along with an aging population. Very well-managed company. Not a cheap stock anymore.

100% of revenues come from the domestic US market. This gives a decent dividend of 1.4%. The stock just keeps moving up. Excellent execution on the part of management. Pretty decently valued at 19X earnings for a 14% growth. One of the cheaper names in the consumer staples space. He likes this name.