Prosperous tycoon Israel Englander Amassed This Dividend-Rich Share Significantly in Q3. Is It Worthy for You to Invest as Well?
Millionaire Izzy Englander, with a fortune exceeding $14 billion, isn't reliant on dividend earnings. This fact is likely shared by most investors in his Millennium Management fund. Yet, Englander doesn't deter from investing in dividend stocks. His third-quarter transactions in 2024 serve as proof. In this quarter, Englandermade a substantial purchase of a high-yield dividend stock.
Englander's Aggressive Q3 Purchase
Upon examining Englander's Q3 investments for Millennium Management, you'll likely observe an increase in several existing holdings. For instance, Englander boosted his stake in the SPDR S&P 500 ETF Trust by 81%. He also surpassed Millennium's position in Spotify Technology by doubling it.
However, a trade that particularly stands out is Englander's acquisition of additional 4.61 million shares of CVS Health, leading to a 724% increase in Millennium's position within the healthcare company. At the end of the third quarter, Englander's hedge fund's stake in CVS was worth $330 million, representing merely 0.29% of its overall portfolio.
It's crucial to understand the diversified nature of Millennium Management's investments. The hedge fund possesses positions in 4,040 stocks and exchange-traded funds (ETFs), with its largest holding comprising less than 2.8% of its portfolio.
The Pros, Cons, and Ugly of CVS Health
To my knowledge, Englander hasn't disclosed why he enhanced Millennium's stake in CVS Health so significantly. Nevertheless, there are appealing aspects to this healthcare stock.
For instance, CVS Health's forward dividend yield is a tempting 4.62%. Many income investors would relish such a lucrative yield. Furthermore, the company's valuation appears appealing with shares trading around 8.3 times forward earnings. In contrast, the forward earnings multiple of the S&P 500 healthcare sector stands at 18.3.
However, CVS Health has its drawbacks too. Its performance hasn't met expectations, resulting in the replacement of Karen Lynch with a new CEO, David Joyner, in October. CVS Health's Aetna unit is still grappling with difficulties. The pharmacy benefits management (PBM) industry is also under scrutiny, causing uncertainty for CVS Caremark.
Finally, there's the unfavorable. CVS Health's share price has plummeted by nearly 50% below its early 2022 peak. Despite an attempt at a late-September and early-October rally, the beaten-down stock subsequently relinquished its gains and slipped further.
Is CVS Health Stock a Smart Buy?
CVS Health appointed four new directors to its board following what the company referred to as a "productive engagement" with activist investor Glenview Capital Management. Among the new directors are Glenview CEO Larry Robbins, along with two experienced healthcare professionals and OneMain Holdings CEO Doug Shulman.
While shareholders might anticipate positive changes due to the additions of Robbins, Norwalk, Sansone, and Shulman to CVS Health's board, it's premature to draw conclusions.
I believe CVS Health has the potential for a significant recovery. The company maintains its might in the retail pharmacy and PBM industries. While Aetna faces challenges now, it has solid earnings potential. However, CVS Health's recovery may take some time. Investors may be best served by remaining patient until clear signs of improvement emerge.
Based on Englander's investment decisions, it can be inferred that he believes in the potential financial returns of dividend stocks, such as CVS Health. His significant investment in CVS Health, despite its challenges, underscores his confidence in the company's future dividend payments.
In the realm of finance, investing in dividend stocks like CVS Health can be a strategic choice for yield-focused investors, offering both current income and potential capital appreciation if the company's performance improves.
