1. CVS Health Corporation (NYSE:CVS)
Forward P/E: 10.48
Number of Hedge Fund Holders: 63
CVS Health Corporation (NYSE:CVS) is a retailer that operates in four segments: health care benefits, health services, pharmacy & consumer wellness, and corporate/other. Apart from being a prominent pharmacy chain, the company is one of the largest health insurers in the United States through its Aetna subsidiary’s operations.
CVS Health Corporation (NYSE:CVS) has a diversified business, and its solid market presence across various segments gives it a competitive edge. In recent years, it has focused on primary care, expanding its portfolio through its Cordavis subsidiary, which markets and develops biosimilar drugs.
While the company has uncertainty surrounding its future performance under a new CEO, its total revenue for fiscal Q4 2024 increased to $97.7 billion, reflecting a 4.2% growth compared to the prior year and bringing optimism to its operations. Although the company has delivered underwhelming results in the past, it is undergoing several recent management changes and initiatives that are expected to bring it back on track. CVS Health Corporation (NYSE:CVS) has a forward P/E of 10.48 and is trading at a 46.16% discount to its sector. Its median price target of $55.00 implies an upside of 19.09% from current levels.
Patient Capital Management stated the following regarding CVS Health Corporation (NYSE:CVS) in its Q4 2024 investor letter:
“CVS Health Corporation (NYSE:CVS) struggled throughout the year following a number of disappointments related to their Medicare Advantage business. While this had a negative impact on the near-term financials, the issues are well understood, and changes are already being made for the 2025 program. We see a clear pathway to improving margins throughout 2025 in all areas of the business. Furthermore, the company has upgraded their management team promoting David Joyner to CEO and hiring former UnitedHealth Group executive Steven Nelson to run the managed care business. On a longer-term basis, we continue to think CVS has an attractive combination of assets owning a healthcare benefits business (Aetna), a pharmacy-benefits manager (Caremark), an in-home evaluation business (Signify Health) and in-home primary care business (Oak Street Health) supporting the industry transition to a value-based care model. As the company works to implement the turnaround, the company has an attractive dividend yield of 5.8%.”
Overall, CVS ranks first among the 12 cheap retail stocks to buy according to hedge funds. While we acknowledge the potential of retail stocks, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than CVS but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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