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Top Stocks 2013: CVS & Yahoo

 December 27, 2012 11:14 AM

by Chuck Carlson, editor DRIP Investor

My top conservative pick for 2013 is drugstore operator CVS Caremark (CVS). For more aggressive investors, my pick is Yahoo! (YHOO).

In many ways, CVS is in a nice sweet spot. The drugstore and pharmacy benefits manager is not dependent on overseas business and thus is shielded by problems in Europe.

Also, the firm should benefit from more people being brought into the health-care system as a result of Obamacare. Profit and revenue growth in 2013 should outpace that of most corporations. And I look for excellent dividend growth in 2013 and beyond.

[Related -Express Scripts Holding Company (ESRX): Should You Own ESRX in 2014?]

The stock is reasonably priced relative to its growth potential and represents a solid play for capital gains, income, and especially dividend growth.

CVS offers a direct-purchase plan whereby any investor may buy the first share and every share of stock directly from the company. Minimum initial investment is just $100.

Yahoo is certainly an aggressive pick. But there's a lot to like here:

  • New management (a top executive from Google is now leading the charge).
  • A cash-heavy balance sheet (the equivalent of around $8 per share)
  • Operating momentum (the firm has beaten earnings estimates in each of the last three quarters)
  • Solid stock price action.
  • A kicker in its equity stake in Alibaba.
I look for these shares to continue their upside momentum in 2013 and would feel comfortable buying at current prices.

[Related -Yahoo! Inc. (NASDAQ:YHOO): What Will Drive Future Revenue For Yahoo!?]

Yahoo offers a direct-purchase plan whereby any investor may buy the first share and every share directly from the company. Minimum initial investment is $250.

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