Please ensure Javascript is enabled for purposes of website accessibility

2 Great Stocks You Can Buy on Sale

By Dave Kovaleski - Feb 26, 2021 at 6:39AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Brand names for less -- what more could you want?

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 0.67%), the largest pharmacy chain in the U.S. Another is Allstate (ALL 2.09%), 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. 

A woman, smiling, standing in a store looking at her phone with a credit card in the other hand.

Image source: Getty Images.

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.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

CVS Health Corporation Stock Quote
CVS Health Corporation
CVS
$97.80 (0.67%) $0.65
Wal-Mart Stores, Inc. Stock Quote
Wal-Mart Stores, Inc.
WMT
$126.00 (2.13%) $2.63
Amazon.com, Inc. Stock Quote
Amazon.com, Inc.
AMZN
$2,221.55 (4.03%) $86.05
Walgreens Boots Alliance, Inc. Stock Quote
Walgreens Boots Alliance, Inc.
WBA
$43.04 (1.37%) $0.58
The Allstate Corporation Stock Quote
The Allstate Corporation
ALL
$133.69 (2.09%) $2.74
The Blackstone Group L.P. Stock Quote
The Blackstone Group L.P.
BX
$118.30 (6.53%) $7.25

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
332%
 
S&P 500 Returns
118%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/26/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.