Avon Products: An Overcorrection Creates an Opportunity

Further, I also like the fact that Avon's restructuring, including increased supply chain efficiency, has cut costs, and also enhanced incentives for its sales force. The First Call FY2010/FY2011 EPS estimates for AVP are $2.04 to $2.39.

Technically, as noted, Avon's stock has overcorrected, falling about 20% in the past two months. The break below the key, 50-day moving day average also is a concern. Still, the calculation here is that the stock's sustained drop below the 50-day MA, and its failure to hold support at/near $30 are largely due to the Dow's late January/early February swoon. Hence, I still view the shares as attractive.

2010 Outlook: I view Avon as a long-term play, but if investors are looking to sell AVP within the year, it's probably best to take your profits after it rises to $34-36, if it fails to rise above $37.

Stock Analysis: I consider Avon Products to be a moderate-risk stock. If an investor has already purchased the company's shares, I'd hold them. If I were to buy Avon, I'd consider buying a 25% position in AVP now; then buy another 25% in one month, if U.S. and global economic conditions don't worsen substantially. Under any circumstance, I wouldn't buy more than 75% of my AVP position before April 2010 and I'd put a sell/stop loss at: $24.

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