Is CVS Health Corp (CVS) a Smart Long-term Buy?

VLTAVA Fund recently released its Q3 2020 Investor Letter, a copy of which you can download here. VLTAVA is a global equity investment fund launched by Daniel Gladis in 2004. You should check out VLTAVA Fund’s top 5 stock picks for investors to buy right now, which could be the biggest winners this year.

In the said letter, VLTAVA Fund highlighted a few stocks and CVS Health Corp (NYSE:CVS) is one of them. CVS Health Corp (NYSE:CVS) is a healthcare company. Year-to-date, CVS Health Corp (NYSE:CVS) stock lost 19.6% and on October 12th it had a closing price of $59.72. Here is what VLTAVA Fund said:

“During the past quarter, we acquired one new position, CVS Health Corporation. It is a relatively large American company with sales around the same level as Apple. CVS is a health care company. To put it simply, its business can be divided into three areas: a retail pharmacies chain, pharmacy benefit management services, and health insurance.

We have been following CVS for a long time. We began monitoring the company more closely in 2018, when CVS acquired the health insurance company Aetna, a direct competitor of Humana, into which we first invested in 2009. We like CVS’s new integrated business model, but, as tends to be the case with such a large acquisition, it often brings with it some problems. In most cases, acquisitions prove to be overpriced and come with large debt and integration issues. We decided to wait and see how things developed. Now, two years later, integration has not caused fundamental problems, the debt has been declining rather quickly, and the cost of the acquisition has long been reflected in the stock price. Today that price is around the same level as it was in 2013 and meanwhile the earnings per share have doubled. We acquired CVS at 7.5 times this year’s earnings and with a double-digit free cash flow return.”

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In Q2 2020, the number of bullish hedge fund positions on CVS Health Corp (NYSE:CVS) stock decreased by about 8% from the previous quarter (see the chart here), so a number of other hedge fund managers don’t seem to agree with CVS’s growth potential. Our calculations showed that CVS Health Corp (NYSE:CVS) isn’t ranked among the 30 most popular stocks among hedge funds.

The top 10 stocks among hedge funds returned 185% since the end of 2014 and outperformed the S&P 500 Index ETFs by more than 109 percentage points. We know it sounds unbelievable. You have been dismissing our articles about top hedge fund stocks mostly because you were fed biased information by other media outlets about hedge funds’ poor performance. You could have doubled the size of your nest egg by investing in the top hedge fund stocks instead of dumb S&P 500 ETFs. Below you can watch our video about the top 5 hedge fund stocks right now. All of these stocks had positive returns in 2020.

Video: Top 5 Stocks Among Hedge Funds

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers after its stock price crashed. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free enewsletter below to receive our stories in your inbox:

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