CVS and Walgreens are the two largest healthcare and pharmacy retail chains in the United States. As a prospective investor, you may want to know whether CVS Health Corporation or Walgreens Boots Alliance stock options make more sense.
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Yahoo Finance spoke with Alex Morris, president and CIO of F/m Investments, to explain why he thinks CVS is the right choice. He noted that CVS Health is a better investment than its competitors because of CVS' more experienced leadership, which has demonstrated its ability to grow in a changing market. CVS is vertically integrated with Aetna and also offers insurance. Morris said the merger will allow customers to buy other products in addition to prescriptions, something competitors don't offer. He added that while this comes with concerns associated with being an insurance company, it ultimately benefits the company in the future given the potential difficulties and uncertainties of the retail industry.
Meanwhile, when it comes to Walgreens, Morris talks about how the trend is the other way around. Walgreens does not have such attractive insurance products. Additionally, management turnover is rapid, and without a consistent message that comes with “consistent leadership,” stock prices and profits will be depressed. While Walgreens has low trading prices and a high dividend yield, its cash flow is deteriorating and it requires continued funding. CVS doesn't have these problems, instead it has a strong valuation, growth potential, and free cash flow. The company recently acquired Signify Health and Oak Street Health, increasing its long-term growth opportunities.
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Walgreens recently named Tim Wenworth as its new CEO. Morris calls him an industry veteran and someone who could turn things around, but ultimately he's not worried about CVS' prospects. He points out that Walgreens' growing international presence is one of many “moving parts” that will make it difficult for them moving forward. He remains confident that CVS Health is a good investment option.
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This article originally appeared on GOBankingRates.com: Walgreens or CVS Stock: Which is a better investment?
