Pick: CVS Caremark (CVS)
Of late CVS Caremark stock has been hot, with a 17% gain over the past year. But it's not too late to buy, argues Tom Forester, who's best known as the only U.S. stock fund manager to make money in 2008. His $247 million Forester Value Fund (FVALX) has posted 4.8% annualized returns since launching in 1999 (vs. 2.0% for the S&P). CVS trades at a 13.4 P/E, based on estimated 2012 earnings, below the average for the broader consumer staples sector, Forester says. He thinks the company is well positioned to prevail against Walgreen (WAG) in the battle for pharmacy supremacy. Walgreen had a falling out with pharmacy benefits manager Express Scripts (ESRX), a squabble he says is driving market share to CVS. And Forester says CVS's merger with PBM Caremark is starting to pay off: "Caremark has recently won huge contracts, giving CVS a lock on a steady stream of prescription clients." The broader trends are favorable too: Baby boomers are retiring, which means more prescriptions, and CVS has spent the last few years cutting costs.
--K.B.
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