CVS Health Corp (CVS)

They just beat earnings and revenues, raised their full-year forecast, and shares jumped 8% today, a three-year high. With earnings up, he argues that the stock has become cheaper.

About 22% upside to analysts' price target. Trending sideways. Looks cheap on the surface, but cheap for a reason. Be cautious until we see the full turnaround. Less visibility quarter to quarter.

In the space, she owns ABBV, MRK, TMO, and ABT. These higher-quality names have more growth and less execution risk.

It reports on Tuesday. Is more of a managed care company than a drug company. The stock got hammered after Washington said it would barely raise Medicare rates this year, a disaster for health insurers. That said, the CEO has done a great job. Is the last national drug store chain. Is worth considering.

He owned it in the past and sold too early. It has done well lately. A change in management is working.

A good way to play the sector. Drug stores, but also pharmacy benefits managers. Sector should see a pickup, as worst of insurance operations is past. Trades ~12x forward PE (much cheaper than UNH).

Are reinventing themselves well, covering the front and back of the store and mounting an incredible comeback in its health insurance business.

CVS is a cheaper way to play the private benefits market, so he added that recently and it offers a better valuation than UNH.

Turnaround story mainly due to activist actions, and that's not a great reason to buy. Its retail pharmacy space continues weak, and that's dragging down the pharmacy benefits side. Above 200-day MA, which is starting to move higher. Earnings growth still tepid at 6.5%.

Was down 43% in 2024, led by their managed care business, to be one of the worst stocks of 2024. But that business is now finally turning around, +12% in revenues in Q2 YOY, and revenues beating the street. So, the health insurance side is doing much better. They raised revenue guidance and full-year earnings. Firing on nearly all cylinders: drug store, pharmacy benefits, health service division (including in-store medical clinics) saw 10.2% revenue growth. Also, the front-of-store and pharmacy delivered a strong revenue beat and growing 12.5% YOY as competitors have vanished (i.e. RiteAid). Pharmacy sales were +18% YOY. CVS shares are up 58% this year and trades at only 11x PE and pays a 3.7% dividend. The CEO has done a remarkable job this year. Has more room to run.

Numbers are improving under the new CEO, with good numbers from Aetna and core drugstore business (they closed the weak performers). Though the health insurers like UNH have taken it on the chin recently, he expects Aetna to score. They report Thursday.

Is up 50.5% this year, benfitting from chief rival Walgreens are going private, and CVS' managed care business, Aetna, is putting up better numbers. CVS got too cheap last year, but mounted a comeback after hiring a new CEO. But it remains a drugstore chain, which he doesn't like, given Amazon's dominance.

He just bought it after earnings. Finally, we're seeing positive momentum with earnings growth and lower costs. It's an easy trade. An investor would now see a fundamental turnaround.

Shocking that it rallied 25.8% in January, since it was spiralling last year, down 43%. There's no clear catalyst for their rally, though it helped that Medicare payments would increase from 2025 to 2026. He's waiting for their report next Wednesday before deciding.

It has been a turn-around for a long time but hasn't performed well. It lost a few key contracts in the past two years. He prefers United Health.

Company fundamentals are challenging. On paper, looks like a good model. But in practice, fail after fail. Overhang of healthcare malaise. Doesn't matter what the price is, you need fundamental quality to create value. Pass.