Investors are dealing with unprecedented times in the wake of the coronavirus. While no industry has been spared from the devastating impact of the virus, some have proved to be more resilient than others. With signs that the pandemic may be easing, and stocks showing hopeful indications of rebounding from their recent bear market plunge, you may be searching for new investment opportunities that you can rely on once the crisis is over.
CVS Health (CVS -0.65%) and Walgreens Boots Alliance (WBA -1.18%) look like they present such buying opportunities. Both companies are deemed essential businesses and are selling key staples and medications to customers throughout the pandemic. CVS and Walgreens have also opened COVID-19 testing sites at locations around the country. CVS has testing sites in Massachusetts, Rhode Island, and Georgia, while Walgreens is expanding drive-thru locations to Florida, Arizona, Kentucky, Illinois, Tennessee, Louisiana, and Texas.
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CVS: The future of healthcare?
A primary reason for recommending CVS is that it's a go-to for consumers both during and in the absence of a pandemic. In a regular buying climate, CVS is poised for long-term gains because it sells daily essentials, from toothpaste to lifesaving prescriptions.
In a crisis, companies like CVS provide the services consumers require more than ever. And it may have an entirely new market to explore in healthcare services once the country returns to normalcy.
By acquiring Aetna in 2018, CVS set itself apart from the competition as it rolled out its HealthHUB clinics in stores across the country. It is becoming increasingly clear that the strain of the coronavirus will force commercial insurance companies to raise their premiums for 2021, which could very likely cause consumers to seek more-accessible and affordable forms of primary care.
CVS' Aetna acquisition and its moves to rebrand itself will almost certainly increase its competitive edge in the healthcare market. With a 3.3% yield and current stock price resting around $61 coming off a 52-week high of $77.03 and a 52-week low of $51.72, CVS appears to be a solid buy.
Walgreens: Strongly positioned for growth
Like CVS, Walgreens is nearing its 52-week low of $39.40, with a stock price currently hovering around $45. The company's 52-week high was $64.50.
Walgreens reported its Q2 earnings in the first week of April. The company saw an initial boost in revenue as consumers stocked up on essentials in the early weeks of the coronavirus pandemic, but these sales gains have since retracted.
That being said, Walgreens reported revenue that exceeded analysts' projections for fiscal Q2, allowing the company to enter the pandemic from a position of relative strength. Revenue for the second fiscal quarter grew year over year by 3.7% to nearly $36 billion in sales.
CEO Stefano Pessina said:
We are pleased to report second-quarter results exceeding our expectations, with sequential improvement in comparable U.S. prescription volume and retail sales. During these unprecedented times of global uncertainty, Walgreens Boots Alliance is on the front lines of combating the COVID-19 pandemic. Our No. 1 priority is to continue to provide essential services, products, and information at this critical moment of need ...
Walgreens has given no indications of slashing its dividend amid the coronavirus. The payout currently has an annual yield of about 4%. With a track record of consistent annual revenue increases and its status as a provider of essentials during the shutdown and the time to follow, this stock looks like a prudent investment choice.
The key takeaway
As has been the case with most sectors of the financial market at large, healthcare stocks have experienced their fair share of volatility over the past month or so. Investors have naturally been concerned that with a decline in retail sales nationwide, companies like CVS and Walgreens will inevitably be hurt despite their essential status. But both companies have shown remarkable resiliency in a heretofore unimaginable market situation.
Not only that, but CVS and Walgreens will remain go-to sources for consumers long after the storm has lifted. Given the potential for slow but steady long-term growth, these stocks are strong contenders to buy and hold in the pandemic and beyond.
