CVS All In and Raise!

The Stay Invested portfolio was DOWN today: $137.04 (-0.13%)

Overall GAIN/LOSS YTD: +$6,308.95 (+6.14%)

Start: $102,717.24

Current: $109,026.19

Our benchmark index, the S&P 500 is UP Year-To-Date +11.39%

http://money.cnn.com/data/markets/sandp/

(daily performance is updated after the close, early blog posts typically show the previous days performance)

"If somebody offers you an amazing opportunity

but you are not sure you can do it, say yes – then learn how to do it later!"

― Richard Branson

Bought more CVS

Apologies, I didn't have time to write a post to precede today's buy of shares in CVS.

Our current position was about 50% of a full position, with today's pull back I went ahead and purchased the remaining portion at $58.50/share, $4.50 below our cost basis.

CVS is simply too inexpensive at these levels and in my opinion is being overly discounted by investors and algorithmic trading systems. The addition of Aetna is a power combination that along with previous acquisitions dating back to 2014 are transforming CVS into a healthcare company that happens to have a great pharmacy business. With this purchase I am also raising my 12-month price target to $91.50.

CVS with the Aetna merger is positioning itself as a growth company. The CVS transformation has been in full swing since 2014 when they acquired Navarro Pharmacies, a discount chain. Later that year CVS stopped selling tobacco products, this was a signal that they were transitioning to a healthcare company and abandoning the pharmacy pure play model. 2015 saw the acquisition of OmniCare, a pharmacy business that specializes in senior care facilities. Some argue that they over paid, I think its just one piece of the new structure and will ultimately show its worth. Also in 2015 CVS acquired Target Stores pharmacy business which gave them quick, scalable entry into clinics; over 1600 pharmacies and 80 clinic locations; this was an awesome buy. Now 9800 stores nationwide, CVS has the scale to be a big player in healthcare.

Adding Aetna is a distinct advantage and eliminates any residue of being a pure pharmacy play, CVS is now a healthcare pioneer and will provide services in store and in clinic that we haven't seen or imagined before. Since many hospital and ER visits are for indications that can be handled by a nurse or a medClinic, consumer healthcare costs will be significantly lower. At a time when drug costs and healthcare costs are politically volatile, CVS is positioning to be the white knight in the fight. Separately, if the healthcare cohort trades lower on the ACA District Ruling, remember that CVS is not expected to be impacted by this. Not only do shares yield more than 3%, but the price-to-earnings multiple on 2019 earnings has fallen to below 9x. From a pure arithmetic standpoint, remember that Aetna was previously a mid-teens earnings multiple business and it will represent about 1/3 of the new company's EBIT. When combined with CVS Health, which as a standalone company would trade near a multiple of a Walgreens Boots Alliance ( WBA) , which is currently around 11x next year's earnings, there is simply too much discounting in this stock. CVS's book value is $52 and today closed at $58.51. Should CVS share decline another 12.5% to book value I will be very tempted to take an overweight position in the great company.

My Buy below price: $63.00 (January 1, 2019)

My price target is $88.57 (January 1, 2019)

My New PT: $91.50 (February 27, 2019)

Analysts average PT is $80.23

Low PT: $62

High PT: $103

Stay Invested,

Clay Baker

ENTER YOUR NAME & EMAIL ADDRESS TO SUBSCRIBE

SUBSCRIBE HERE

Keep Me Honest

S&P 500 declines to 2,350 or more (1-3-2019)

Healthcare and Biotech sectors outperform (1-3-2019)

S&P reaches 3,000 by year end (1-11-2019)

CSCO reaches $60/share (1-18-2019)

VEEV reaches $145/share (2-14-2019)

CVS reaches $91.50 (2-27-2019)

Disclosure: I am personally invested long in some or all of these stocks or funds that appear in the Stay Invested portfolio and may purchase or sell shares within the next 72 hours. I am also invested in other stocks and funds that do not appear in the Stay Invested portfolio but may be mentioned or related to this article. It is not my intention to advise or encourage the purchase or sale of any security. I am invested long in these securities mentioned in this post:

CVS, CSCO, VEEV, STZ, AMZN, NVDA, BCRX, GS, BDSI, VEEV, VTI, GLD.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. This article is not intended to offer investing advice, guarantee 100% accurate predictions, or to be interpreted as providing a personal recommendation.

Featured Posts
Recent Posts
Archive
Search By Tags
Follow Us
  • Facebook Basic Square
  • Twitter Basic Square
  • Google+ Basic Square

This material is provided for informational purposes only, as of the date hereof, and is subject to change without notice.
This material may not be suitable for all investors and is not intended to be an offer, or the solicitation of any offer, to buy or sell any securities.

© 2016 by Clay Baker all rights reserved