I initiated a new position today in CVS Health Corp (CVS) at $61.84. It is our 10th largest position at this time.
Reason for current opportunity
- The share price for CVS has been under pressure because of a variety of threats:
- Companies like Amazon entering their markets and perhaps trying to remove the profit from the industry.
- Political pressure to decrease drug costs and regulate drugs/insurance.
- Shareholder belief that CVS is overpaying for Aetna destroying shareholder value.
CVS has been on my watch list for a while as it’s become an increasingly good value. Most people know CVS for their CVS Pharmacy retail stores. However, the company is looking to become much more. Through various acquisitions, they are morphing into a more complete healthcare services company that includes benefits management, health insurance, retail pharmacy stores and clinics. CVS purchased Caremark (prescription benefit management) and intends to purchase Aetna (managed health care/ health insurance). CVS also operates MinuteClinic (retail clinics).
This makes for a great opportunity for CVS to use it’s negotiating power and to increase efficiencies in order to provide lower cost healthcare products/services than their competitors as well providing a one-stop solution to customers.
CVS currently trades at a:
- 9.7 forward PE
- forward earnings yield of 11%
- PEG of 1
- PEG payback in years is 6.1
- dividend yield is 3.2%
These numbers are significantly better than the industry average and the healthcare industry should continue to grow from here.
I believe the current stock price drop represents a great opportunity for those not currently invested or with a small position in CVS. If the price should continue to drop, I will most likely add to this initial position.
I added more to my position today in Facebook Inc (FB) at $160.32.
Now my 8th largest holding. I still think at this level, it’s a great opportunity.
The recent pullback again brings the price back to near my first purchase. I imagine this is due to the earnings release coming out later today and fears over the impact of the news feed changes and data leak scandal. I believe the fears are overblown and this poses a good opportunity.
As for the newsfeed changes. I feel that reducing page based content should help boost revenue/earnings in that pages will need to rely on paying to have their posts shown.
However, if they should have made an impact the price continues to drop, I will consider to add more at lower prices depending on the severity of the news and impact to the business. I would be willing to double my current position from here.
See previous post on Facebook Inc here.
Once again, I added more to my position in Carrols Restaurant Group, Inc. (TAST) today at $10.79/share taking advantage of the recent price drop.
Carrol’s is now my 2nd largest holding.
I think at this level, it’s a great opportunity. The February earnings call had much to like in it. The last quarter and last year has shown the strong marketing capabilities of Burger King and how well Carrols in particular is at executing acquisitions and managing stores, despite increasing costs of beef and labor as well as increasing competitive pressure.
They continue to acquire restaurants which impacts earnings. However, book value continues to increase, which is how I choose to judge their performance along with total sales which continues to grow on same stores and total stores basis.
At this time, it’s estimated that Burger King franchise goes for over $500,000 to start one. However, with Carrols you are getting established franchises with top performing management in place for only $474,240 each as they currently have 807 stores and are valued at $382,712,000. From the earnings call above they have shown they they can quickly absorb and improve acquisitions and have several deals currently in negotiation right now, one of which includes 20-30 more stores. Overall, Carrols seems like a real bargain to me and I may continue to buy more shares if the price stays at this level or goes lower.
I initiated a new position today in Facebook Inc (FB) at $159.80.
I’ve been following Facebook for some time as I’m a regular user and I utilize their advertising platform for our own and client businesses. I feel their advertising platform is a very good value and great for targeted campaigns to build awareness. I also use Google for advertising more for campaigns targeting those ready to buy or with a specific need in mind. I have higher budgets with Google than I do for Facebook campaigns. However, Facebook & Instagram (which Facebook owns) campaigns have been steadily increasing in share of total budgets. Most recently have I have been using Facebook’s remarketing campaigns which is where you target people that have already visited your site. You then place ads to encourage them to come back to your site. These are particularly powerful as these visitors have already shown interest in your offer. Both Facebook and Google do this well. However, overall I think Facebook’s ability to target within their advertising system is better than Google’s at this time and the value is better.
Reason for current opportunity
The share price for Facebook has been under a lot of pressure due to the recent scandal involving a data breach with Cambridge Analytica and the Federal Trade Commission’s announcement of an investigation into the company’s abilities and willingness to protect user information. It has been said that the negatives of this are overblown and that any downside is already well priced into the current stock price. The platform is still very strong and there doesn’t seem to be any signs that revenue/income will not continue to grow.
Facebook is the largest social media company in the world with more than 2 billion monthly active users. They have continued growth in users and user engagement. Their platform provides advertisers an extremely valuable tool to target customers. They have been successful where most of the peers such as Twitter and Snapchat have not. They have the capital and earnings power to continue to innovate and acquire firms that may supplant the flagship Facebook.com website in the future, as they did with Instagram.
Facebook currently trades at a 22.2 forward PE and PEG of 1. The PEG payback in years is 7.9. They have impressive margins and revenue/earnings growth. I feel at this price, there is little risk and a high probability the value of the company will be much higher years from now.
I believe the current stock price drop represents a great opportunity for those not currently invested or with a small position in Facebook. If the price should continue to drop, I will most likely add to this initial position.
Once again, I added more to my position today in Community Bancorp (CMTV) at $16.55.
Still my largest holding and a great opportunity.
However, if it should have a significant increase from this point I will probably sell some if other opportunities arise as I have a larger percentage of my portfolio in this single company than I’m usually comfortable with.
However, I’m fairly comfortable parking a significant portion of my capital here while waiting for other opportunities to diversify.
See more comments on Community Bancorp here.