CVS, Walgreen: Pull-Backs Are Buy Opportunities

Longer term, each business model looks promising, as well. CVS, although client attrition will weigh on pharmacy benefits management revenue, remains the industry standard regarding store placement, and has also done a good job consolidating acquisitions. Walgreen, the second-largest prescription filler behind CVS, remains, like CVS, well-positioned to capitalize on the expected 2 million to 3 million annual increase in Americans who will regularly access health care services as part of health care reform legislation.

The First Call FY2009/FY2010 EPS estimates for CVS are $2.63 to $2.78; the First Call FY2010/FY2011 EPS estimates for WAG are $2.34 to $2.74.

Technically, each stock has pulled back, creating preferred entry points for those who missed the February 2009 buy recommendations. Their risks are comparable; hence, it would not be unreasonable to split your shares purchase between the two.

2010 Outlook: CVS and WAG are long-term plays, but if you're looking to sell either within the year, take your profits with CVS after it rises above $39; WAG after is rises above $43.

Stock Analyses: CVS Caremark and Walgreen are moderate-risk stocks. If you haven't already, consider buying a 50% in investment in CVS or WAG now; then add to your position in three months. Sell/stop losses are: CVS, $18; WAG, $17.

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Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.