CVS Health Corp (CVS)

There are a couple things going on. A lot of generics are hurting the stock, and same-store sales have been very difficult over the last while. Amazon (AMZ-Q) supposedly moving in on pharmaceuticals has been hurting. The talk of doing a merger with Aetna would create a fair bit of dilution, and people are worried about that. He would be a buyer. Retail over the long-term is a very strong business.

These types of stocks have all been hit for a few reasons. There are too many pharmacies in the US. The dispensing margin is being narrowed, so margins are also being hit. Also, the threat of Amazon is hovering over the pharmacy business. He still sees headwinds.

This had a Sell signal on his system last week. It had a negative transit of UV+3. He would sell this.

It is consolidating and is a really good example of a base. You know to sell it if it breaks down 3% below the trading range for 3 weeks. If it breaks to the upside 3 weeks, 3% to the upside, then you should buy it.

In many cases this is a Trump Administration story. Drug stocks have come off significantly, along with the companies that sell drugs to the American consumer. There has been a recovery in a lot of the drug stocks, and he’s not 100% convinced that Americans want to give up Obamacare. Ultimately, this is a story of drug price inflation and the attempts of the government to rein costs in. Longer-term, it is an interesting story, but a very thin margin business. If you get a small drop in profitability, stocks tend to come back significantly. This may be a buying opportunity, but for him the margins are a little skinny and not on his radar.

This is a company that he likes, and with the stock price dropping makes it even better. There has been a lot of outside pressure in the space. However, the results are actually quite good. This is more about what people think is going to happen but hasn’t actually happened yet. The returns are very good.

Down 15%. Hold or Sell? He would probably get rid of this. 15% is something you never want to lock in, but at the same time you can use this to offset any capital gains in other positions. This is in a sector that is technically broken.

It is down. Earnings are expected to increase next year. It will likely recover because it is trading at 12 times earnings. He would be a buyer.

This whole space has been challenged, as well as a bit of an Amazon (AMZN-Q), but doubts that will happen. As we get older, people are taking more and more pills. However, we are moving away from patented medicines towards generics, which have lower margins attached to them. About a 3^rd of their business is dedicated to a Pharmacy Benefit Manager, an insurance middleman, to act on behalf of individuals to get better prices. They have 10,000 locations in the US, including deals with Target. Bought Omnicare, which services old-age homes. Will write over a billion subscriptions in 2017.

(A Top Pick July 28/16. Down 13%.) This has slipped because of some concerns of the pharmacy benefit management industry in the US. The valuation is still very, very compelling. It trades at a deep discount to the S&P 500 at about 13X earnings.

A solid company. The #2 drug store in the US, as well as being involved in the pharmacy benefits management business, which has been a super profitable business over time, but is now under pressure. Feels the whole PBM business could be under a bit of profit pressure for the next several years. He would prefer a health insurer.

This has struggled on 2 fronts. They lost a big pharmacy benefit contract to Walgreens (WBA-Q), which cost them about 40 million prescriptions. Secondly, these are drugstores that are brick-and-mortar. A lot of retailers are starting to struggle because of Amazon (AMZN-Q). If he owned this, he would probably sell it.

Great company. He would buy it down here as it has been hurt the last year or two. Walgreens had taken some of their market share. The business is changing. It has such a good brand. They are everywhere you go. His numbers are fantastic. He thinks everything negative is priced in.

Chart shows this has been in a bit of a downtrend, but the good news is that it has been consolidating. It could be an ascending triangle where the lows get higher and the highs are pretty flat. If it breaks through the low $80s to the upside, it could be very bullish.

Had a fairly large set back from the last year or so, and is kind of consolidating at about 2X BV. It has nice upside potential of 51%. The downside risk is to about $74, and that is where he would love to be a buyer. It has fairly easy upside to about $92. He wouldn’t worry about this one in the slightest.