Tag Archives: NYSE:CVS

How to Build a Position in Your Favorite Stocks

This article with an additional example using Tencent (OTCMKTS:TCEHY) first appeared in the Seeking Alpha Marketplace service DGI Across North America.

Have you ever missed out on high-flying winners? Have you ever been stuck in a (seemingly) losing stock for a long time? I’ll use Amazon.com (NASDAQ:AMZN) and CVS Health (NYSE:CVS) as examples for illustration.

person with a question

How to Build a Position in Your Favorite High-Flying Winner

An investment in Amazon 10 years ago has become a 24-bagger. In other words, it delivered returns of roughly 37.5% per year. That said, we’ve been in a bull market since 2009.

In a correction, it’s possible that Amazon stock could fall 30-50%. In a normal market though, one of the best ways to build a position in a high-flying stock like Amazon is buying it periodically.

Some investors wait to buy stocks on dips. However, you’ll notice that in the last few years, dips in Amazon stock didn’t occur very often.

chart showing dips of Amazon stock between 2016 and 2018

Source: Google Finance with author annotation – Potential buy points when using the “buying on dips” strategy

If you waited for a dip in Amazon stock in June 2017, you wouldn’t have gotten one until April 2018. However, by then, the stock had already appreciated +40%.

At this point in the cycle, I’m leaning more towards buying high-flying stocks on a correction, whenever it may occur. Share in the comments below if you have a different opinion.

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3 Reasons CVS Health Corp is a Good Company

If you have been a shareholder of CVS Health Corp (NYSE:CVS) in the last few years, it might have been a scary ride in the last two. I hope this article will be useful for shareholders and for people who are considering to invest in CVS today.

Why? This article reflects on my Seeking Alpha article and the investment community comments which followed.

CVS Health continues to grow its dividend

For the last 13 years, CVS Health has never once disappointed dividend-growth investors. In fact, last week, the company just announced another 17.6% dividend increase for 2017.

CVS Health logo

This is good news in the midst of management’s estimations of flat bottom line growth for next year, in which it expects net revenue growth of 4-5.75%, adjusted earnings-per-share (EPS) growth of -0.5% to 2.5%, and free cash flow decline of 7-13%.

Do not worry. I believe the company should be able to maintain its dividend growth streak. (Don’t laugh. I’ve seen a company that has raised its dividend and only to cut it soon after.)

Although CVS Health’s earnings are expected to remain flat on a per-share basis, its payout ratio for next year is expected to be less than 35% and very sustainable.

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Do Quality Shares Lead to Lower Returns for Your Portfolio?

Managing your own stock portfolio is not easy. One of the many important decisions is choosing between quality and returns. Is there a cost in investing in high-quality shares? Could buying them lead to lower returns?

There’s no simple answer. However, your rate of return on a stock depends largely on the valuation you paid and the growth rate of the company. Besides, there are other considerations outside of aiming for high returns.

Let’s explore the answers with examples, including Microsoft Corporation (NASDAQ:MSFT), The Coca-Cola Co (NYSE:KO).

Quality companies tend to trade at premiums

Some say you can get quality and returns too. The rationale being that when you buy quality companies, their steadily rising earnings will lead to steadily rising share prices. However, if you overpay for them, the expected returns will likely be unsatisfactory. Read More