Author Topic: CVS - CVS Health Corporation  (Read 48559 times)

Spekulatius

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Re: CVS - CVS Health Corporation
« Reply #160 on: March 01, 2019, 11:32:18 AM »
If I owned CVS and fonít Like their integrated health care approach, I would just sell and buy WBA instead. FWIW, I just bought a starter in WBA today in todayís mini crash.

I believe their approach could work.

I also believe what you said about a big write-down in the future.

Yes, CVS approach could work, but there is a whole lot more risk both from an execution and balance sheet angle compared to WBA. If you like the retailing side, there is no reason to stick with CVS when you can buy a pure play at a similar valuation ( adjusted by leverage). I always try to isolate a long thesis from its expression.
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dwy000

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Re: CVS - CVS Health Corporation
« Reply #161 on: March 01, 2019, 12:45:06 PM »
If I owned CVS and fonít Like their integrated health care approach, I would just sell and buy WBA instead. FWIW, I just bought a starter in WBA today in todayís mini crash.

I believe their approach could work.

I also believe what you said about a big write-down in the future.

Yes, CVS approach could work, but there is a whole lot more risk both from an execution and balance sheet angle compared to WBA. If you like the retailing side, there is no reason to stick with CVS when you can buy a pure play at a similar valuation ( adjusted by leverage). I always try to isolate a long thesis from its expression.

WBA is a much better retailer.  And better managed.  CVS gives some protection against things that hit WBA today like rebate pressure because they are now on both sides of that payment.  But the tradeoff for that is huge leverage and the issues that come from the PBM and payer side in an uncertain healthcare market.  From a retail perspective though, having a rational oligopoly in an area that is only going to grow is not a bad thing whichever player you back.

DooDiligence

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Re: CVS - CVS Health Corporation
« Reply #162 on: March 01, 2019, 01:22:55 PM »
I agree with both of you & thanks for making your argument against CVS clear to me.

I've been too busy staring at the trees to see the potential for the forest getting clearcut.
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Gregmal

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Re: CVS - CVS Health Corporation
« Reply #163 on: March 27, 2019, 05:36:15 AM »
This has gotten interesting IMO. All that was already discussed here aside, I think potentially having $10B in FCF during their "transition" year is pretty impressive. Shorter term debt maturities aren't overwhelming and should easily be covered by FCF in excess of payout.

My question to those that follow; what do you guys think of management?


dwy000

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Re: CVS - CVS Health Corporation
« Reply #164 on: March 27, 2019, 08:16:13 AM »
This has gotten interesting IMO. All that was already discussed here aside, I think potentially having $10B in FCF during their "transition" year is pretty impressive. Shorter term debt maturities aren't overwhelming and should easily be covered by FCF in excess of payout.

My question to those that follow; what do you guys think of management?

I will probably get lambasted for it but I like Merlo.  There are certainly faults (overpaying for acquisitions being the foremost) but I think the very long term vision for CVS's role in the future of healthcare is ahead of most others. They are more diversified and vertically integrated now and while they are not as good at retailing at Walgreens, that is becoming a smaller component of the business.  Given the breadth of the businesses now I think his key role is making sure the people running the 3 businesses are the best out there. Again though, this is an oligopoly right now with huge tailwinds so hopefully it is becoming a business that can overcome weak management even if that's the case.

Gregmal

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Re: CVS - CVS Health Corporation
« Reply #165 on: March 27, 2019, 02:34:24 PM »
This has gotten interesting IMO. All that was already discussed here aside, I think potentially having $10B in FCF during their "transition" year is pretty impressive. Shorter term debt maturities aren't overwhelming and should easily be covered by FCF in excess of payout.

My question to those that follow; what do you guys think of management?

I will probably get lambasted for it but I like Merlo.  There are certainly faults (overpaying for acquisitions being the foremost) but I think the very long term vision for CVS's role in the future of healthcare is ahead of most others. They are more diversified and vertically integrated now and while they are not as good at retailing at Walgreens, that is becoming a smaller component of the business.  Given the breadth of the businesses now I think his key role is making sure the people running the 3 businesses are the best out there. Again though, this is an oligopoly right now with huge tailwinds so hopefully it is becoming a business that can overcome weak management even if that's the case.

Thanks. Yea I kind of agree with this. From the outside this kind of seems like a business that is good enough to negate the effects of a less than stellar manager. I'm trying to hunker down and determine whether this outside view is concrete enough to base an investment on it.

I agree WBA is better at the retail end of things but frankly dont think this will be too much of an advantage for too long. There are only so many places where you can charge $2.50 of a 2-liter of soda or 30% more on grab and go products that are much cheaper at other stores or online. So I see that advantage eventually going away. I think CVS decided to give this up when they stopped selling cigarettes.

My ideal scenario is they take this year to smooth things out, pay down some debt, and then just spit out cash like a broken ATM. We will see.

KCLarkin

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