A Billionaire’s Surprising Investment Choice
Israel Englander, a billionaire with a net worth of over $14 billion, doesn’t need dividend income to support his lavish lifestyle. However, his investment choices suggest that he sees value in dividend-paying stocks. In the third quarter of 2024, Englander’s hedge fund, Millennium Management, made some interesting trades that caught our attention.
A Significant Bet on CVS Health
Among Englander’s notable purchases was a substantial increase in his stake in CVS Health, a healthcare company with a high-yield dividend. He bought an additional 4.61 million shares, boosting his fund’s position by a whopping 724%. Although CVS Health remains a relatively small position in Millennium Management’s portfolio, it’s worth exploring why Englander might be bullish on this stock.
Attractive Valuation and Dividend Yield
CVS Health’s forward dividend yield stands at an impressive 4.62%, making it an attractive option for income investors. The company’s valuation also looks appealing, with shares trading at around 8.3 times forward earnings, significantly lower than the S&P 500 healthcare sector’s forward earnings multiple of 18.3.
Challenges Ahead
However, CVS Health faces several challenges, including underperforming business expectations, which led to a CEO change in October. The company’s Aetna unit is struggling, and the pharmacy benefits management industry is under scrutiny. Moreover, Amazon’s expansion into same-day prescription deliveries poses a competitive threat.
A Potential Turnaround Story
Despite these challenges, CVS Health has the potential to make a strong comeback. The company remains a dominant player in the retail pharmacy and PBM businesses, and Aetna’s earnings potential is significant. The recent appointment of four new board members, including activist investor Glenview Capital Management’s CEO Larry Robbins, could help steer the company towards creating more value.
Should You Follow Englander’s Lead?
While Englander’s investment in CVS Health is intriguing, it’s essential to exercise caution. The company’s turnaround may take time, and it’s too soon to know what changes the new board members will bring. Investors may want to wait until more evidence of improvement is visible before buying into CVS Health.
Don’t Miss Out on the Next Big Opportunity
If you’re worried about missing out on the next big investment opportunity, our expert team of analysts can help. On rare occasions, they issue “Double Down” stock recommendations for companies poised for significant growth. These recommendations have led to impressive returns in the past, and now may be the best time to buy before it’s too late.
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