We recently published a list of Jim Cramer’s December Portfolio: Top 10 Stocks to Watch. In this article, we are going to take a look at where CVS Health Corp (NYSE:CVS) stands against other stocks to watch in Jim Cramer’s December portfolio.
Jim Cramer in a latest program on CNBC talked about the evolution of AI and how the technology has come from being ignored as “hype” to now completely changing everyday lives for many. Cramer mentioned the AI solutions offered by Marc Benioff’s company and said the technology is actually exceeding expectations “dramatically.” [read Marc Benioff’s latest comments here]
Cramer mentioned the comments of Benioff on his company’s new AI-powered solutions:
“Suddenly, though, we have Agent Force, and with it, Marc said, I quote, “We’re unleashing this new year of digital labor force for every business and every industry.” He went on to say, quote, “The implications are just simply profound. Now people ridicule me for saying how much we need AI, but Marc says, quote, ‘For decades, economic growth depended on expanding the human workforce. It was all about getting more labor,’ end quote. Not anymore—not with agents powered by AI who, as you’re stating, can work faster, doing tedious things but essential jobs that nobody wants.
And there it is—you hear that Marc got 200 deals in the first week of Agent Force alone, lots of brand-name companies too. Do you know there are thousands more in the pipeline? Real customers, real money, tangible. That’s an insane amount of business to do,” Cramer said.
READ ALSO: Jim Cramer’s Latest Lightning Round: 11 Stocks to Watch and Jim Cramer on AMD and Other Stocks
For this article, we watched some latest programs of Jim Cramer and picked 10 stocks he was talking about. With each stock we have mentioned the number of hedge fund investors. 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 275% since May 2014, beating its benchmark by 150 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 Corp (NYSE:CVS)
Number of Hedge Fund Investors: 63
Talking about CVS Health Corp (NYSE:CVS), Jim Cramer said in a recent program on CNBC that he’s waiting to see where the stock bottoms and said he sees “maybe” another bad quarter for the company.
“I’ve been waiting to see where it could bottom, and Deutsche Banks taking the leap might be a little too early because there could be one more bad quarter. But it’s worth talking about, and I think it’s good. It’s better than Honeywell, which is down five, because they don’t know how to tell the story.”
Cramer said CVS Health Corp (NYSE:CVS) new CEO David Joyner is doing a “good job.”
What ails CVS Health Corp (NYSE:CVS) is the rising competition. CVS has expanded beyond retail, particularly after acquiring Aetna in 2018, but retail and pharmacy sales still account for around 50% of its total revenue. The pharmacy services segment is facing growing competition from non-traditional retailers like Kroger, Walmart, and Costco, as well as from new disruptors like Mark Cuban’s Cost Plus Drugs and Amazon, which has expanded into healthcare and pharmaceutical sales.
Retail margins are also under pressure, with competitors offering cheaper prescriptions and household goods. CVS Health Corp (NYSE:CVS) market share in pharmacy services has only grown modestly, from 23.8% in 2017 to 25.7% in 2023, despite significant acquisitions. CVS Health Corp (NYSE:CVS) has spent $96.6 billion on deals like Aetna, Signify Health, and Oak Street Health. Meanwhile, CVS’s long-term debt has risen sharply, from $25.1 billion in 2017 to $65 billion, and shares outstanding have grown at an annual rate of 3.5%.
Coho Relative Value Equity Strategy stated the following regarding CVS Health Corporation (NYSE:CVS) in its Q2 2024 investor letter:
“While we believe each of those companies is performing in line with or better than our expectations and that the moves lower are unjustified, both CVS Health Corporation (NYSE:CVS) and Nike reported disappointing performance in recent results. In CVS’ case, management gave an optimistic outlook to 2024 at its December Investor Day, which we believed was consistent with our expectations. Unfortunately, management misestimated its medical loss ratio and the anticipated profitability in its book for Medicare Advantaged lives. This triggered a position paper violation, as the company’s financial flexibility now looks constrained in both 2024 and 2025.”
Overall, CVS ranks 4th on our list of stocks to watch in Jim Cramer’s December portfolio. While we acknowledge the potential of CVS, our conviction lies in the belief that under the radar 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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Disclosure: None. This article is originally published at Insider Monkey.
