It should surprise no one that CVS Caremark (NYSE: CVS) attracts a lot of institutional and retail investor interest -- it's a $47 billion pharmacy chain with operations in more than 40 states. What did surprise me, though, was that last year, it was the No. 21 most-owned stock by investment clubs, as measured by the folks at Better Investing. If retail investors were high on the stock, it got me to thinking: What's the consensus sentiment view on CVS?
Turns out, the view is split. Let's have a look at a few of the key sentiment drivers.
1. Analyst opinion
Analysts like CVS Caremark. Data from Capital IQ captures their collective feeling:
|
Opinion |
Number of Analysts |
|---|---|
|
Buy |
10 |
|
Outperform |
7 |
|
Hold |
9 |
|
Underperform |
0 |
|
Sell |
0 |
|
No Opinion |
0 |
Seventeen analysts have either a buy rating or an outperform on the stock -- the majority sentiment. A fair portion (nine) of the analyst crowd deems the stock a neutral hold, but there's not a single underperform or sell, so we'll classify analyst sentiment as bullish.
2. Insider buying
Next we'll look at insider buying and selling. Over the past year, CVS Caremark insiders have sold $86.82 million worth of their company stock. During the same time period, insiders bought $444,780 in CVS Caremark shares. (Data from Form4Oracle.)
It'd be nice to see a bit more insider buying to balance out the selling, even though $86.4 million of net selling isn't all that large relative to the company's $46.5 billion market cap. And to be fair, insiders sell stock for a whole host of reasons -- to pay for a house or tuition, to diversify assets, and so forth. For purposes of this exercise, we'll classify insider buying/selling as bearish-leaning-neutral.
3. Guru buying
Next, we'll look at "guru" ownership of the stock, according to GuruFocus.
In the quarter ended Dec. 31, three gurus were buying CVS shares, including George Soros and Joel Greenblatt. However, there were an equal number of sellers in that quarter, John Hussman and Jean-Marie Eveillard among them. In the previous quarter, five gurus were trading CVS: three buyers, two sellers.
That's a very even balance among buyers and sellers, so we'll classify guru sentiment as neutral.
4. Retail investor community sentiment
For retail investor community sentiment, I turn to Motley Fool CAPS, our proprietary stock rating system. CAPS generates ratings on a one- to five-star scale, with five stars as the highest ranking, indicating that the Fool community believes in a stock's future. CVS Caremark has a favorable four-star rating.
5. Short-sellers
Next we'll look at whether short-sellers are circling the stock. There are 11.3 million CVS shares sold short, according to Capital IQ. As a percentage of shares outstanding, that's a short interest of 0.8%. That's not at all high, and so for determining sentiment, we'll classify the low short interest as bullish.
6. Does Buffett own it?
This is the "cherry on top" test, and in this case, it's a no: Berkshire Hathaway does not own shares of CVS.
Adding it up
The consensus opinion on CVS Caremark is neutral. Analysts and the CAPS community are mostly bullish on the stock, and in another positive sign, short-sellers are staying away. However, insiders are net sellers, gurus are split down the middle, and Buffett doesn't own shares.
Of course, you can't base an investment philosophy on who likes or dislikes the stock you own, and even a consensus bullish opinion can sometimes be a scary thing. Quoting Buffett: "A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful."
The purpose of this series of articles isn't to make a definitive buy-or-sell call on CVS Caremark. Rather, by looking at a stock's sentiment, the goal is to help you place your own opinion of it in a broader context.
One final thing: If you want to keep tabs on CVS's movements, and for more analysis on the company, make sure you add it to your Watchlist.
