The shares of drug store chain giant CVS Caremark (CVS), first written about here on February 16, 2009, at a price of $27.30, have pulled back slightly after testing $36, but just view that retreat as an opportunity to scoop up shares.

CVS's fundamental story remains strong. Look for 2011 revenue to increase 155 to 18%, aided by more pharmacy benefit clients, and 2% to 3% same-store sales growth.

If we told you that the largest pharmacies chains in the U.S., CVS Caremark (CVS) and Walgreens (WAG), planned to sell more groceries and produce, would you believe us? If so, you would be right. CVS Caremark plans to double the size of its food section and revamp about 20% of its 7,000 stores to better cater to groceries and quick check outs, and Walgreens started to satiate its appetite for the nation's trillion-dollar food budget by announcing last year that it would add up to 500 food items including salads, sandwiches, frozen meats, soups, juices, yogurts and even sushi to its offering.

How Do Consumers Benefit?

CVS Caremark (CVS), a drugstore chain that competes with Rite Aid (RAD) and Walgreen (WAG), reported earnings for the fourth quarter on Thursday. The market wasn't taken by them. Looking at the extreme right side of the chart, it can be seen that the stock came under some pressure after the release. This afternoon, the shares are under further pressure: at the time of this writing, they were off by 1.1% to $32.55, with heavy volume backing the trade.

Does it sound like the company missed the estimate attached to it? No, that wasn't the problem. According to the Associated Press, adjusted profit came in at 80 cents per share, one penny ahead of the prediction.

Walgreen (WAG) is having a merry Christmas. The stock closed on Thursday at $39.19. The 52-week high for the shares is $40.20. Pretty cool for those who own this name. Something even cooler: the drugstore chain issued a solid fiscal first-quarter report earlier in the week.

The press release begins with three bragging bullet points: the top line gained 6% and came in at $17.3 billion; gross margin expanded by 80 basis points; operating cash flow was $1.2 billion. Nice, but in terms of the latter point, it should be noted that cash from operations was essentially flat compared to last year's number. That's okay, though, it's still respectable.

To say that the shares of CVS Caremark (CVS), first written about here on February 16, 2009, at a price of $27.30, underperformed this summer would be an understatement.

CVS shares formed a bear hug during a walk-down from about $38 to $27. There, however, the shares appeared to gain equilibrium and have since moved back above $30.

I never would have predicted such a bullish reaction. As I write this, Walgreen (WAG) is up over 12% to $34.04 on the back of an earnings report. With one hour to go before the market closes, volume is huge.

Those of you who bought prior to the report could not have possibly expected this. It represents a big departure from the last time the drugstore posted results. Back in June, shareholders were disappointed with their investment since Wall Street thought the stock should be sold off on the data. It's like night and day this afternoon.

Rite Aid's (RAD) sell-off Thursday was almost comical. Sometimes you've just got to laugh when a stock that's trading around a dollar suddenly drops over 13%. That's exactly what the drugstore's shares did by the end of the day's regular session. It finished at a quote of 95 cents. And, as you might expect, volume was pretty significant.

Who buys a stock like this? Clearly, someone braver than me. Adding this one to a portfolio is basically no different than playing the slots in Vegas. The one-year chart hasn't changed much since I discussed the company back in June; it still tells a tale of volatility and downward momentum. It's not a ride I'm willing to take.

I'm going to offer up brief opinions on some of the events from the past trading week. Maybe you had your eye on one or two of them as well.

Playboy (PLA) reported a net loss in its second quarter. The red ink came out to 16 cents per share this time around; last year, the loss was 26 cents per share. You know what? It doesn't really matter if management was able to narrow the bleeding. Playboy is purely an arbitrage play now, with Hugh Hefner making a bid to take control of the business (a competing bid has been made by FriendFinder, which owns Penthouse). I would avoid making a buy here, since the arbitrage game can be a difficult one to win.

Analyst Upgrades

• BofA/Merrill upgraded ConocoPhillips (COP) to neutral from underperform following the better-than-expected Q2 report. The firm has a $61 price target on shares.
• Deutsche Bank upgraded Citrix Systems (CTXS) to buy from hold following the company's Q2 results and raised its target for shares to $65 from $45. Shares were also upgraded to neutral from underperform at Cowen following the better-than-expected Q2 report.
• Macquarie upgraded Arch Coal (ACI) to outperform from underperform and raised its price target to $29 from $23. The firm expects PRB priced to move higher given increased domestic and export demand combined with supply shortfalls.
• Boeing (BA) was upgraded to hold from sell at Societe Generale.
• Equinix (EQIX) was upgraded to outperform from perform at Oppenheimer.
• Williams-Sonoma (WSM) was upgraded to equal weight from underweight at Barclays.

Walgreen Co. (WAG - option chain) shares rose Friday after the company said it signed a new agreement with CVS Caremark (CVS) that will allow Walgreen to continue participating in CVS's pharmacy benefit management network. Financial terms of the deal were not disclosed. If you think that the stock won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on WAG.

WAG opened at $31.01. In morning trading, the stock hit a low of $30.18 and a high of $31.38. As of 12:00, WAG was trading at $30.37 up 1.10 (3.8%). The chart for WAG looks bullish and S&P gives WAG a positive 4 STARS (out of 5) buy ranking.

I first discussed CVS Caremark Corporation (CVS) here on February 16, 2009, at a price of $27.30. Shares of drug store chain giant have pulled back recently, but investors may view that move as an opportunity to scoop-up shares at a decent price. Here's why.

Look for methodical, successful CVS post same-store sales growth of 4% to 6% in 2010.