I’m making this Big Bet Stock Pick on 7/28/2015 as CVS trades for $109.77. Its hard to find stock that are good values now at a time when the market is especially jittery over China and Greece. I believe even if the market goes down from here, CVS is a great company and stock that you can comfortably hold for the foreseeable future.
One of the main reasons I like CVS is their recent decision to get further into healthcare and in doing so, decided to stop selling cigarettes and other tobacco products. While this will be an immediate hit on the bottom line, it will enable them to form a better relationship with doctors, healthcare providers, and hospitals which should benefit them for years going forward. Obamacare (The Affordable Care Act) is becoming solidly entrenched now and CVS is hoping to get a lot of business from the industry.
Another recent development is their deal to buy Target’s pharmacy business. This gets the company squarely in the eyes of a whole new set of customers who use Target for most of their consumption needs. Target superstores allow you to shop for just about anything you want to buy including food, clothing, toys, electronics, and drugstore items. Now those people will be using CVS for those drugstore needs which will contribute nicely to sales.
Adding more health items is another move that should be met with enthusiasm as the store pivots away from tobacco products. While it might seem that Americans are more overweight than ever, there is a growing movement towards health. This can be seen with changing menus at many fast food restaurants, wearable fitness trackers, and growing interest in organic fruits and vegetables. Adding more healthy foods and putting them in prominent places within the stores should work to offset some of that lost tobacco money.
CVS’s stock price gives you a 1.3% dividend which will help a little if their is a market downturn. It seems that while this stock is near a 52 week high, it is actively pursuing markets in healthcare which have many years ahead of growing sales. The baby boomers are just getting started in their retirement years and many will need increasing amounts of prescriptions and other things that CVS is selling. It seems to be one of the safer stocks you can buy right now.