Moon Capital Management, LLC, an investment management company, released its fourth quarter 2024 investor letter. A copy of the letter can be downloaded here. The majority of experts believed two years ago that a U.S. recession might be approaching within the next twelve months. Two years later, however, the economy has managed to escape contraction, inflation is under control, profit margins are strong, and investor confidence has returned. The S&P 500 has also generated its best two-year return since 1998, the year before the Internet investment bubble burst, with a 23% gain in 2024. In addition, please check the fund’s top five holdings to know its best picks in 2024.
Moon Capital Management highlighted stocks like CVS Health Corporation (NYSE:CVS), in the fourth quarter 2024 investor letter. CVS Health Corporation (NYSE:CVS) is a US-based health solutions provider. The one-month return of CVS Health Corporation (NYSE:CVS) was -7.20%, and its shares lost 41.71% of their value over the last 52 weeks. On January 8, 2025, CVS Health Corporation (NYSE:CVS) stock closed at $46.01 per share with a market capitalization of $57.899 billion.
Moon Capital Management stated the following regarding CVS Health Corporation (NYSE:CVS) in its Q4 2024 investor letter:
“We sold all our CVS Health Corporation (NYSE:CVS) shares in December at approximately $50 per share, achieving a modest (and disappointing) gain over our multi-year holding period. While CVS has generated significant cash flow in recent years – a figure that is likely to grow in the near term due to its Medicare Advantage business – the intrinsic value of the company, has not seen a substantial increase. Over the past three years, the company has burned through more than $18 billion of its free cash flow on acquisitions of Signify and Oak Street Health. (Burned through” is a financial euphemism for “wasted.”)
At the time, we believed these acquisitions were significantly overpriced, and recent developments support that view.
CVS is currently targeting 3-5% of its long-term total operating income from Health Care Delivery, the business unit that includes the Signify and Oak Street Health acquisitions. Approximately 60% of this segment’s revenue comes from these two acquisitions – and they are expected to contribute only a mid-single-digit percentage of operating income over time (compared to an acquisition cost that represents 20% of the company’s current enterprise value). Unsurprisingly, when CVS lowered its guidance in 2024, part of the reduction stemmed from the Health Services division, which houses Health Care Delivery…” (Click here to read the full text)
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CVS Health Corporation (NYSE:CVS) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 63 hedge fund portfolios held CVS Health Corporation (NYSE:CVS) at the end of the third quarter which was 60 in the previous quarter. While we acknowledge the potential of CVS Health Corporation (NYSE:CVS) as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as NVIDIA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
In another article, we discussed CVS Health Corporation (NYSE:CVS) and shared the list of best dividend stocks to buy in January. In addition, please check out our hedge fund investor letters Q4 2024 page for more investor letters from hedge funds and other leading investors.
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Disclosure: None. This article is originally published at Insider Monkey.