We recently published a list of Stocks On the Rise: 10 Best Stocks to Buy Right Now. In this article, we are going to take a look at where CVS Health Corporation (NYSE:CVS) stands against other best stocks to buy right now.
As per Merrill Lynch, 2025 has not shown much movement. Between the US tariffs and trade wars, geopolitical scenarios, and more, investors continue to be surrounded by attention-grabbing headlines. The firm believes that investors are required to stay focused on numerous key trends that continue to emerge beneath the surface, such as a rebound in the global economic activity, demonstrating signs of a manufacturing recovery. The US continues to be aided by a strong consumer and healthy labor market with double-digit US earnings growth and the unfolding of market rotation. Elsewhere, China has been making efforts to revive its business confidence and consumption. Also, certain parts of Europe have been experiencing expansion mode.
Consolidation in Sector Valuations
Merrill Lynch believes that robust business confidence has been overwhelming tariff and trade worries, with the global economy demonstrating signs of picking up steam instead of slowing down as the consensus has been expecting. This has resulted in the bull run in equities to spread out from the US into other countries that have started to outperform the US. Generally, a synchronized global acceleration remains positive for the earnings outlook and risk assets.
While the growth stocks have been experiencing a sell-off and value stocks continue to appreciate, Morningstar has seen its sector valuations consolidate towards fair value. For instance, the healthcare, real estate, and basic materials were the most undervalued sectors when the year kicked off, but each has now moved closer towards the fair value. Elsewhere, consumer cyclical was overvalued and has experienced a drop to fair value.
READ ALSO: 7 Best Stocks to Buy For Long-Term and 8 Cheap Jim Cramer Stocks to Invest In.
Amidst Uncertainties, What Should Be the Strategy?
Morningstar highlighted the current headlines which continue to weigh on investors’ sentiments. From the corporate earnings and guidance, to the tensions related to DeepSeek, including Trump’s tariffs news, there has been significant volatility in the broader markets. Morningstar believes that investors are required to focus on fundamentals, maintain a long-term mindset, and focus on valuations. As per the firm’s valuations, the rotation into value stocks possesses sufficient ability to run. Apart from attractiveness of the value stocks, the rotation into value is expected to yield healthy returns as the broader economy slows and earnings of growth stocks also witness the same momentum.
Our Methodology
To list the Stocks on the Rise: 10 Best Stocks to Buy Right Now, we used a screener to shortlist the stocks that have gained at least 30% YTD, and have a market cap of over $2 billion. We also mentioned the hedge fund sentiments around each stock, as of Q4 2024. Finally, the stocks were arranged in ascending order of their hedge fund sentiments.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
A row of shelves in a retail pharmacy, demonstrating the variety of drugs and over-the-counter products.
CVS Health Corporation (NYSE:CVS)
% Gain on a YTD Basis: ~49.1%
Market cap as on March 6: ~$83.0 billion
Number of Hedge Fund Holders: 74
CVS Health Corporation (NYSE:CVS) offers health solutions. Mizuho Securities analyst Ann Hynes maintained the bullish stance on the company’s stock, providing a “Buy” rating. The analyst’s rating is backed by several factors that suggest potential for the stock. The recent earnings report demonstrated that CVS Health Corporation (NYSE:CVS) performed better than the anticipations in Q4 2024, with adjusted EPS exceeding both consensus and internal estimates. Notably, the company posted GAAP diluted EPS of $1.30 and adjusted EPS of $1.19 in Q4 2024. As per the analyst, this indicates robust operational performance, mainly in the face of challenges within the Health Care Benefits segment, which exceeded the expectations despite a decline.
Furthermore, Hynes highlighted that CVS Health Corporation (NYSE:CVS)’s guidance for 2025, despite slightly below consensus, was received positively, as it demonstrates a transitional year for the company that could result in a recovery in margins in upcoming years. Elsewhere, Allen Lutz from Bank of America Securities reiterated a “Buy” rating on CVS Health Corporation (NYSE:CVS)’s stock with a price target of $75.00, courtesy of the potential earnings growth driven by Aetna’s ability to support its existing earnings base as it returns to normal profit margins. Additionally, the substantial operating leverage in the company’s model supports this rating.
Ariel Investments, an investment management company, released its Q4 2024 investor letter. Here is what the fund said:
“Lastly, American healthcare company, CVS Health Corporation (NYSE:CVS) underperformed in the period. The company preannounced a third-quarter preliminary profit estimate materially below consensus expectations and pulled its 2024 guidance due to continued medical cost pressures. Investor concerns around the recently proposed Pharmacy Benefit Management (PBM) legislation further weighed on shares. Despite these challenges, management reiterated its focus on improving margins and enhancing its positioning in Medicare Advantage (MA). CVS believes the program can remain an attractive business for Aetna and CVS Health over time as it implements a multi-year repricing strategy across plan level benefits. Meanwhile, CVS continues to take actions to drive long-term success including the appointment of longtime company executive David Joyner as President and CEO as well as adding four new board members.”
Overall, CVS ranks 2nd on our list of best stocks to buy right now. While we acknowledge the potential of CVS as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for a deeply undervalued 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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Disclosure: None. This article is originally published at Insider Monkey.
