There are some great brand-name stocks in the discount bin right now if you know where to look. One of them is CVS Health (CVS -1.62%), the largest pharmacy chain in the U.S. Another is Allstate (ALL -0.07%), one of the largest property and casualty insurers in the country.
These two companies are among the leaders in their respective industries, and both are solid buys right now at their current values. Let's take a closer look at why.
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CVS Health: Great value as market leader
CVS had a solid year in 2020, with revenue rising 4.6% to $269 billion and net income up 9.1% to $7.2 billion. Despite the solid earnings, CVS' stock price was down about 5% for the year. While CVS has seen increased competition from big box and online pharmacies, namely Walmart and Amazon, it has about 10,000 retail stores across the country and holds a 24.5% market share, far ahead of its next closest competitor, Walgreens Boots Alliance. And it has made some moves in recent years that should enable it to maintain its market leader status.
The big move was buying health insurance giant Aetna in 2018 -- an outside-the-box move, perhaps, on its face, but it brought over roughly 20 million Aetna members to CVS Health's services. CVS has also bulked up its in-store and online healthcare services. Currently, it has more than 650 HealthHub clinics in its stores, with plans to have 1,500 of them across the country by the end of 2021. It also rolled out e-clinic services in its MinuteClinics, where patients can consult a health professional in real time, virtually. These are services that its competitors can't offer at this scale.
In addition, CVS is one of the federal government's partners in its effort to vaccinate some 300 million Americans from COVID-19, which will it allow it to deepen and broaden its customer base.
Despite all the good news, CVS' stock is sporting a price-to-earnings ratio of 9.3, a price-to-sales ratio of 0.34, and a price-to-book ratio of 1.33 -- all below the company's five-year averages. So take the opportunity to buy this market leader at a great value.
Allstate: In good hands
Allstate is the fifth-largest property and casualty insurer in the U.S., and its name is ubiquitous because of its television advertisements, which promise customers they're "in good hands."
The stock price was essentially flat last year, down less than 1%, and it's down about 1% this year, too. But the stock is undervalued given the company's strong financials.
Allstate reported a 4.8% increase in revenue in the fourth quarter to $12 billion and a 52% increase in net income to $2.6 billion. For the full year, revenue was flat at $44.8 billion and net income was up 16.7% to $5.5 billion. The company had a combined ratio of 79.1, which is down 5.6 percentage points from a year ago. The combined ratio measures how much the company is spending in paying out in claims versus taking in premiums. The lower it is, the more efficient and profitable the company.
Allstate has made several moves to increase its market share in its personal property liability lines. In July, it acquired auto insurer National General to bolster its auto insurance business. Allstate CEO Tom Wilson said on the fourth-quarter earnings call that this will increase auto insurance market share by 1% in 2021 and provide the platform to further expand that business. In January, it sold off its life insurance business, Allstate Life Insurance, for $2.8 billion to The Blackstone Group to focus on investing in and growing its personal property liability market share.
In addition, Allstate has a great dividend, which it increased in the first quarter to $0.81 from $0.54. It currently yields 3.0%, which is roughly double the S&P 500 average.
Like CVS, Allstate is undervalued, with a P/E ratio around 6.3 and a P/B ratio of 1.2. These two brand-name stocks are poised to move up as the companies seek to increase their market share. As they say in the biz, these low prices won't last forever.
