MedcoHealth (MHS): 'Healthy breakout'

Technician Leo Fasciocco looks for "breakout" stocks in his Ticker Tape Digest advisory. Here, the advisor  reviews pharmacy services firm, Medco Health Solutions (NYSE: MHS).

"With annual revenues: of $51 billion, Medco provides pharmacy benefit management services a pharmacy services designed to help lower the cost of healthcare. 

"Its services are provicded through its national networks of retail pharmacies and its own mail-order pharmacies, as well as through its specialty pharmacy segment, Accredo Health Group. , a pharmacy services firm that helps lower the cost of healthcare.

"Technically, the stock has edged out from an eight-week flat base recently to hit an all-time high. The action is nicely bullish. The stock also has a low beta of 0.47 versus 1.00 for the stock market. So, it is half as volatile as the stock market.

"The stock began trading in 2003 and has stayed in a solid up trend. It weathered the bear market very well. It has since come back strongly. Over the past 12 months, MHS's stock appreciated 45% versus an 18% rise for the S&P 500 index. It has done well for a big cap issue.

"The stock's momentum indicator is extremely bullish. The accumulation - distribution line is in a strong up trend. That shows good buying interest that should be supportive of a push higher.

"This year, MHS should show a 20% increase in net to $2.78 a share from $2.33 a year ago. The stock sells with a price-earnings ratio of 20, which is reasonable. Going out to 2010, the Street sees net climbing 16% to $3.24 a share.

"Institutional sponsorship is excellent. The largest fund holder is 4-star rated T. Rowe Price Growth Stock Fund with a 2.4% stake. It was the largest buyer recently picking up 633,000 shares. Also, 5-star rated Fidelity Contrafund purchased 363,000 shares recently.

"The stock is a good looking big cap play. We are targeting the stock for a move to 66 within the next few months. A protective stop can be placed near 54, which is tight. Overall, we rate MHS a good intermediate-term play for conservative investors."