Michael Burry is Shorting Tesla Inc. (NASDAQ: TSLA) and Buying These 5 Stocks Instead

4. CVS Health Corporation (NYSE: CVS) CALL

Number of Hedge Fund Holders: 56    

CVS Health Corporation (NYSE: CVS) is a Rhode Island-based healthcare firm that owns and runs retail pharmacy stores. It was founded in 1963 and is ranked fourth on our list of top 10 holdings of Michael Burry. Scion Asset Management, led by Burry, owns 400,000 shares in the company worth over $30 million. This comprises close to 2.2% of the entire investment portfolio of the asset management firm. CVS stock has returned more than 39% to investors in the past year. 

CVS Health Corporation (NYSE: CVS) stock was given an Outperform rating by investment advisory RBC Capital Markets on May 5 with a price target of $91, implying a 13.8% upside potential, on the back of strong quarterly results posted earlier. 

At the end of the fourth quarter of 2020, 56 hedge funds in the database of Insider Monkey held stakes worth $96 million in CVS Health Corporation (NYSE: CVS), down from 61 in the preceding quarter worth $117 million.

In one of its investor letters, VLTAVA Fund highlighted a few stocks and CVS Health Corp (NYSE:CVS) is one of them. 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.”