CVS and Walgreens are the two largest healthcare and pharmacy retail chains in the U.S. As a prospective investor, you might want to know which stock option makes sense: CVS Health Corporation or Walgreens Boots Alliance.
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Yahoo Finance spoke with Alex Morris, F/m Investments President and CIO, who explained why he believes that CVS is the right choice. He noted CVS Health is worth investing in over its competitor because of the more experienced leadership at CVS, where the company has demonstrated its ability to grow within a changing market. CVS is also vertically integrated with Aetna, offering insurance as well. Morris said the merger means that customers will purchase not only prescriptions, but also other items as well, which is something that their competitors do not offer. He added that while this brings along the relevant concerns of being an insurance company, it ultimately benefits them in the future with potential retail difficulty or uncertainty.
On the other hand, when it comes to Walgreens, Morris discusses how the trends are the opposite. Walgreens does not have that enticing insurance offering. It also has high leadership turnover, and without the consistent message that goes along with “coherent leadership,” the stock prices and earnings suffer. While Walgreens trades cheaper and has a greater dividend yield, it has worse cash flow and an ongoing need for funding. CVS simply doesn’t have this issue, but rather, strong valuation, growth potential and free cash flow. They recently acquired Signify Health and Oak Street Health, adding to their long-term growth opportunities.
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Walgreens recently had a new CEO appointment, Tim Wenworth, who Morris calls an industry veteran and someone that could turn things around, but he ultimately isn’t worried about CVS’ prospects. He notes that Walgreens’ greater international presence is one of many “moving parts” that will make going forward for them a difficult process. He remains confident that CVS Health is the right investment option.
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This article originally appeared on GOBankingRates.com: Walgreens or CVS Stock: Which Is a Better Investment?