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Here’s Why Vltava Fund Sold Its Stake in CVS Health Corporation (CVS)

Vltava Fund, an investment management company, recently released its second-quarter 2024 investor letter. A copy of the letter can be downloaded here. The letter discusses how the firm determines the size of each holding in the portfolio. The firm keeps the number of positions in the portfolio between 20 and 25 considering it as ideal. It gives ample opportunities for diversification. Please review the fund’s top five holdings to see its best choices for 2024.

Vltava Fund highlighted stocks like CVS Health Corporation (NYSE:CVS), in the second 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 -6.59%, and its shares lost 18.52% of their value over the last 52 weeks. On July 3, 2024, CVS Health Corporation (NYSE:CVS) stock closed at $56.70 per share with a market capitalization of $71.179 billion.

Vltava Fund stated the following regarding CVS Health Corporation (NYSE:CVS) in its Q2 2024 investor letter:

CVS Health Corporation (NYSE:CVS) used to be a very popular stock in the markets. The share price growth, along with investor optimism, peaked sometime in mid-2015. Thereafter, investor enthusiasm gradually began to wane and criticism of management’s capital allocation surfaced. The criticisms intensified especially in late 2017, when CVS announced its acquisition of the health insurer Aetna for USD 69 billion. This price was very excessive and the acquisition also saddled CVS with a large debt burden for many years to come. The stock price responded with further gradual, significant decline. The stock came onto our radar in 2020, when it was very cheap. CVS’s business looked solid to us and generated strong free cash flow. Our positive view of the company was reinforced when CEO Larry Merlo announced his departure in that year. He had been behind the acquisition of Aetna, and new CEO Karen Lynch, who had been Aetna’s CEO up until that time, announced that her main goals would include reducing debt and returning excess cash to shareholders. The poor acquisition of Aetna was not her doing and she had enjoyed a good reputation as Aetna’s CEO. We succumbed to the belief that overpriced acquisitions were a thing of the past and that the new management would allocate CVS capital more efficiently. We were wrong. For a while, it looked like management was on the right track and the share price was rising. But then management reverted to its original acquisition practices. CVS announced two more large acquisitions in 2022 and 2023. These were Signify Health and Oak Street Health. The prices of both acquisitions made no sense to us at all. We realised that relying upon management to begin behaving rationally in terms of capital allocation was not enough, and particularly so in cases of companies where this has not been the case in the past. So, we began gradually to reduce our position in CVS and now the company is no longer in the portfolio. Had we reacted faster, we could have made more money in this stock. In any case, we regard CVS to be our biggest buying mistake of recent years. In the hands of more capable management and with a rational allocation of capital, CVS stock could be at three times its price today. In this instance, we underestimated the negative impact of the human factor on the value of the company. This is a very important lesson for the future.”

A row of shelves in a retail pharmacy, demonstrating the variety of drugs and over-the-counter products.

CVS Health Corporation (NYSE:CVS) is not on our list of 31 Most Popular Stocks Among Hedge Funds. As per our database, 54 hedge fund portfolios held CVS Health Corporation (NYSE:CVS) at the end of the first quarter which was 67 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.

We discussed CVS Health Corporation (NYSE:CVS) in another article and shared the list of largest companies in every state in the US. Ariel Global Fund added CVS Health Corporation (NYSE:CVS) to its portfolio in Q1 2024. In addition, please check out our hedge fund investor letters Q2 2024 page for more investor letters from hedge funds and other leading investors.

READ NEXT: Michael Burry Is Selling These Stocks and A New Dawn Is Coming to US Stocks.

Disclosure: None. This article is originally published at Insider Monkey.

The $250 Trillion AI Hype is Real. A few years from now, you’ll probably wish you’d bought this stock.

Dr. Inan Dogan

Dr. Ian Dogan

Co-Founder and Research Director at Insider Monkey

When Jeff Bezos said that one breakthrough technology would shape Amazon’s destiny, even Wall Street’s biggest analysts were caught off guard.

Fast forward a year and Amazon’s new CEO Andy Jassy described generative AI as a “once-in-a-lifetime” technology that is already being used across Amazon to reinvent customer experiences.

At the 8th Future Investment Initiative conference, Elon Musk predicted that by 2040 there would be at least 10 billion humanoid robots, with each priced between $20,000 and $25,000.

Do the math. According to Musk, this technology could be worth $250 trillion by 2040.

Put another way, that’s roughly equal to:

  • 175 Teslas
  • 107 Amazons
  • 140 Metas
  • 84 Googles
  • 65 Microsofts
  • And 55 Nvidias

And here’s the wild part — this $250 trillion wave isn’t tied to one company, but to an entire ecosystem of AI innovators set to reshape the global economy.

It’s a leap so massive, it could reshape how businesses, governments, and consumers operate worldwide.

Even if that $250 trillion figure sounds ambitious, major firms like PwC and McKinsey still see AI unlocking multi-trillion-dollar potential.

How could anything be worth that much?

The answer lies in a breakthrough so powerful it’s redefining how humanity works, learns, and creates.

And this breakthrough has already set off a frenzy among hedge funds and Wall Street’s top investors.

What most investors don’t realize is that one under-owned company holds the key to this $250 trillion revolution.

In fact, Verge argues this company’s supercheap AI technology should concern rivals.

Before I reveal the details, let’s talk about how some of the richest people on the planet are positioning themselves.

  • Bill Gates sees artificial intelligence as the “biggest technological advance in my lifetime,” more transformative than the internet or personal computer, capable of improving healthcare, education, and addressing climate change.
  • Larry Ellison — through Oracle, is spending billions on Nvidia chips and partnering with Cohere to embed generative AI across Oracle’s cloud and apps.
  • Warren Buffett — not known for tech hype — says this breakthrough could have a ‘hugely beneficial social impact.

When billionaires from Silicon Valley to Wall Street line up behind the same idea — you know it’s worth paying attention to.

Even as we admire what Tesla, Nvidia, Alphabet, and Microsoft have built, we believe an even greater opportunity lies elsewhere…

But the real story isn’t Nvidia — it’s a much smaller company quietly improving the critical technology that makes this entire revolution possible.

And judging by what I’m hearing from both Silicon Valley insiders and Wall Street veterans…

This prediction might not be bold at all:

A few years from now, you’ll wish you’d owned this stock.

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Wall Street calls this $3 stock a “Melting Ice Cube.” They said the same thing about BTI before it returned 90%.

Dr. Inan Dogan

Dr. Ian Dogan

Co-Founder and Research Director at Insider Monkey

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We alerted our subscribers, and BTI returned 90% in just 16 months.

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