2 Stocks That Could Deliver Double-Digit Gains in 2 Months

The flu is back, and this year, it could be worse than ever. According to health officials at the Centers for Disease Control and Prevention (CDC), this year's flu season appears to be one of the more severe in recent years. The CDC reported that during the last week of December, cases of the flu were found in 41 states. Moreover, flu-related child and infant deaths climbed to 18, while outpatient visits for flu symptoms had jumped to 5.6% over the prior year.

In a somewhat conservative statement accompanying the recent report, the CDC's Chief of the Epidemiology and Prevention Branch, Dr. Joe Bresee, said, "While we can't say for certain how severe this season will be, we can say that a lot of people are getting sick with influenza and we are getting reports of severe illness and hospitalizations."

Last week, the CDC said 29 states, along with population centers such as New York City, are reporting high levels of influenza-like-illness. The report said nine other states are reporting moderate levels of flu cases. Ten states, including my home state of California, Connecticut, Hawaii, Kentucky, Maine, Montana, Nevada, New Hampshire, South Dakota and Wisconsin, have thus far reported relatively low levels of influenza-like-illness.

Typically, flu season peaks in late January/early February, so over the next couple of months, we're likely to hear a lot more news about the potential severity of the flu and its impact on the nation's health.

For traders, the need to combat a severe flu season actually could lead to some profitable opportunities in stocks of companies in the business of flu care.

Novartis AG (NYSE: NVS)

Novartis is the leading name in the flu vaccine space. The company makes a plethora of flu-fighting prevention products, including Agrippal, Fluad, Fluvirin and Flucelvax.

In late October and early November, Novartis shares fell sharply after the sale of both Agrippal and Fluad were halted in several European countries and Canada. Small particles found in some of the company's vaccine vials forced removal from the market.

After the situation was quickly rectified by Novartis, the shares returned to their former glory. They are making new 52-week highs this week, and are well above both the 50-day and 200-day moving averages.

The chart here shows the big gains in the stock since June, with the exception of the late October/early November selling.

NVS Chart

I suspect that as flu fears increase, we could see more gains for this leading flu vaccine stock -- at least through the end of flu season.

Recommended Trade Setup:

-- Buy NVS at the market price
-- Set stop-loss at $59.05
-- Set initial price target at $70.60 for a potential 10% gain in two months

CVS Caremark (NYSE: CVS)

Another stock I suspect will benefit from a severe flu season is CVS Caremark (NYSE: CVS). The retail drug seller's shares are trading just below their 52-week high, and above both the 50-day and 200-day moving averages.

CVS Chart

CVS Caremark is one of those "best in breed" stocks, meaning that it is a leading company in the industry. The company is a fundamental powerhouse, consistently delivering strong earnings that beat the competition. And earnings this quarter could be boosted by the sale of flu symptom medications.

In December, CVS said that it expects strong 2013 earnings growth somewhere between 13% and 17%. That is well above Wall Street estimates, and the result was a nice surge higher in the shares to current levels. I suspect that earnings will be well on their way to the high end of those estimates, particularly on any increase in flu-symptom medication sales.

Recommended Trade Setup:

-- Buy CVS at the market price
-- Set stop-loss at $45.72
-- Set initial price target at $54.67 for a potential 10% gain in two months

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