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Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Tiger Consumer's Top 10 Grew 18% This Year

Stocks in this article: ESRX SBUX PCLN HLF

We like Express Scripts. In early April, the company acquired Medco Health Solutions for about $29.1 billion in cash and stock. Last year, Medco generated revenue of over $70 billion and earned about $1.5 billion. As a result, Express Scripts' revenue is expected to increase significantly in 2012. The acquisition is also expected to generate at least $1 billion operating synergies and more than $4 billion cash flow.

In addition to acquisition, Express Scripts has also been buying back its common shares. The company repurchased about 46.4 million of its shares over the past year, boosting its EPS. Analysts expect the company to make $3.60 per share in 2012 and $4.46 per share in 2013, vs. $2.98 per share for the trailing 12-month. The company's forward P/E ratio is about 16, on par with the industry average of 15.10. But, considering its strong growth potential (analysts expect the company's earnings to grow at an average of 16.4% in the next few years), we recommend investors buy this stock.

Starbucks (SBUX) and Herbalife (HLF) also had strong performance this year. Starbucks is up 28% and Herbalife has returned 36% so far this year. Starbucks is very popular among the hedge funds we track. There were 42 hedge funds with Starbucks positions at the end of the fourth quarter 2011, including billionaire Steven Cohen's SAC Capital, Ken Griffin's Citadel Investment Group, and Jim Simons' Renaissance Technologies. We agree with these hedge fund managers and we also recommend the stock as a buy (check out our previous article about Starbucks).

We like Herbalife too. We think the company will benefit from its expansion and the strong growth in Asia Pacific, South and Central America, and Mexico. We are bullish about the stock for the long term. Billionaire Jim Simons' Renaissance also had a large position in Herbalife. The only two other funds with large positions are East Side Capital and Ken Heebner's Capital Growth Management (see Ken Heebner's stock picks).

This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.
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