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It's a big, noisy universe of stocks out there. Welcome to goodbye or goodbye. Our goal to help cut through that noise to navigate the best moves for your portfolio. Today we're checking in on the viability of some healthcare names. What's the healthiest way to play the sector? I'm here with Chad Morgan Lander. He is Washington Crossing Advisor, Senior Portfolio Manager. Thanks for being here. Thanks for having me on.

So, let's get to your buy stock first. It is Elevance Health. Um, ELV is the ticker on that one. Stock's up about 15% this year, so it's already done pretty well. But let's get to why you like it here. Medicare advantage has been tricky for a lot of insurers.

So, yeah. Absolutely. This is a very consistent, steady Eddie, diversified, HMO, medical company. Uh, their volatility and exposure to US government pricing plans is much far less than their competitors, giving this a big advantage. Uh, so we could see multiple expansion just based off of that type of dynamic.

that they don't have the exposure to things like Medicare advantage. Um, and you also like the management of this company. Why?

So, they set the company up where instead of bidding on projects that are not economically viable, they're willing to walk away. Uh, what one major example of that is that they're able to have this formula where they increase their rates without taking on massive exposure to the the different loss, uh, the different payment, uh, uh, losses that come during the quarter. Uh, so they have that flexibility which others do not have.

Gotcha. And then finally, valuation as well, you think is attractive at these levels, even with that gain that we've seen this year.

Yeah, it's trading at 13 times of 2026 multiple, making this extraordinarily cheap. Uh, the revenue growth is roughly about five or six percent. Uh, and you only need about two percent type of revenue growth after year five. So, you're not looking at a company that has a lot of built-in expectations. This is a steady Eddie rising dividend stock you could put away for three to five years.

Well, and just a quick question on that as well, and just healthcare in general because we've been having these conversations, we were just having one at the top of the show about healthcare. Do you like sort of having that steady Eddie, maybe a little bit more defensiveness in your portfolio right now?

From a big picture perspective, yes. As you see the economy just moderate, uh, the healthcare companies overall have underperformed over the last 24 to 36 months. This one, I think is the cream of the crop, uh, well diversified and also growing profitable and doesn't have a lot of debt.

Gotcha. So, let's get to what could go wrong for an elevance. What's the risk here, and that would be more government regulation?

Oh yeah. Uh, more government regulation where you see more of a viewpoint that they have to, uh, break up these HMOs. Uh, and, you know, also, you can see regulatory issues where they get sued by the US government. Uh, I think that this is a low probability, hence the reason why we own it.

Gotcha. All right. So, let's get to the stock you don't like as much, which also has a health insurance business, but not just a health insurance business. We're talking about CVS. The stock is down 25% or so year to date. Um, and when we talk about health insurance, it bought Aetna, but you say the integration is not working well.

Well, without a doubt. First, the acquisition, when they did buy it, they bought it with debt. They bought it with over $40 billion of debt. So, now you're looking at a company that has a tremendous debt overhang of over $50 plus billion dollars. Second, uh, they're just muddling along, not able to integrate the CVS pharmacy into the Aetna platform as they were hoping pre-acquisition. Uh, so the

That was the whole value proposition, right?

Absolutely. So, not only did you have that you were thinking that you were going to get multiple expansion and organic revenue growth that was going to to go up quite a bit, and you got the reverse unfortunately.

It just hasn't materialized. And then what about the retail business, right? You know, people buying stuff in the pharmacies.

Yeah, look no further than, uh, Walgreens, which is struggling right now. Uh, both So, now this is an anchor that doesn't have a competitive advantage that Walgreens and CVS once had. Uh, IE, when you look at Amazon and whatnot, uh, so the pricing competitiveness to sell at a premium, their products has vanished. Uh, hence the reason why we think after post-COVID life, this is going to, uh, this is going to be major another major drag.

Interesting. And you have to wonder also, just a quick aside, how much locking up a lot of the product for these pharmacies has hurt things if you can go on Amazon and order something quickly versus having to go in and get somebody to unlock it physically in a store. I wonder if that affects things.

Oh, absolutely. The friction of buying, uh, one of these products is now becoming a nightmare. Once you get into a CVS, you have to like go live there as opposed to clicking and you get it that day or the very next day.

I was just I was just thinking my mind going to the CVS across the street. And um, and then there is the Aetna side and the HMO side. So, what's going on there?

So, quite the opposite of of, uh, Elevance, okay. You have an issue where they bid on projects or, you know, where they have members that are going and using a little bit more of the healthcare services than they expected. This is crimping on and compressing their margins, and that's also a major headwind for this company.

All right. So, let's get to what could go right for CVS, and there's some kind of turnaround in operations. What, what, is that something they're working on? Is that something that you think is a possibility?

Well, it's low. There's a possibility. The management said, hey, look, you know, when it comes to the Aetna side, we're not going to bid on these projects. We want to get paid well for taking on that risk. There's also the other possibility that you may see an investor, maybe a financial investor come in because they do have valuable properties, in particular on the HMO side. Uh, but one like, uh, Washington Crossing Advisors, we like to buy high quality companies that don't have a lot of debt and are profitable and very consistent. And CVS, unfortunately, has turned out to be one that we would avoid.

Okay. But you guys own Elevance in portfolios. You own Elevance, not CVS.

And not CVS. Not CVS.

Okay. Well, thanks so much for being here today. I really appreciate it. And thank you so much for watching goodbye or goodbye. We'll be bringing you new episodes three times a week at 3:30 p.m. Eastern.

Thanks for having me.