An Excellent Fourth-Quarter Rally Lies Ahead


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There's no way around it. The markets are "hitting the gas" in the fourth quarter.

Here's why:

Is there anyone better than Warren Buffett to analyze the state of the U.S. economy? I mean, his Berkshire Hathaway is a miniature version of the U.S. economy with stakes in every sector, from homebuilders to utilities to insurance to consumer products. I don't know about you, but when the Oracle of Omaha proclaims that the U.S. will not suffer a double-digit recession, I listen. And then there's John Paulson, the legendary fund manager who made billions on the housing market in 2007-by betting against it, of course-while most investors were losing their shirts. Even Bill Gross, the legendary bond manager, is placing big bets on stocks in the final months of 2010-he's starting a new equity fund! An unstoppable tech boom is picking up speed. In the past two years, tech stocks have doubled the performance of the rest of the market, with the NASDAQ soaring +40% and a +20% gain for both the Dow and S&P. I guarantee you're not going to believe me on this one, but here it is: Consumer spending is a growth engine again. A number of A-rated retail companies are reporting sales increases upwards of +75%.

But here's the real kicker…

Wall Street just loves the second half of a new president's term. After two years of implementing his agenda, Mr. Obama will spend the next two years defending it. That means no new policies and investors can bank on a Presidential Election Cycle rally that will extend through November 2012. It has happened in every presidential term since 1945. It's exactly why Buffett, Paulson and Gross are chomping at the bit. And why I'm pounding on the table today.

We're facing a "perfect storm," and when these forces align, it's going to create a boom for investors with the smarts to get in the best companies. I like a number of blue chip stocks right now, and I want to tell you about them.

Farming for profits: Although it's one of the world's largest manufacturers of farm equipment, my first blue chip company actually rakes in the majority of its sales from North America-it has more than 2,500 distribution centers in the U.S. and Canada alone.

Right now, the company is facing a perfect storm: Rising crop prices and a weak U.S. dollar are boosting sales of its agricultural equipment worldwide. Net sales worldwide jumped +6% in the second quarter.

But this is just the beginning… analysts are projecting a whopping +300% rise in earnings and shares have climbed nearly +40% in the past four months. I'm talking about Deere & Company (NYSE: DE ) and it is one of my top buys for the end of the year and beyond.

More than a TV show: My next big blue for end-of-the-year profits is DIRECTV Holdings LLC (NASDAQ: DTV ). This is the largest direct-broadcast satellite service in the United States and is far ahead of No. 2 DISH Network. The company is the gold standard in satellite service. Cable providers like Charter, Comcast and Time Warner have all continued to lose customers in the latest quarters, as they have been unable to upgrade their services enough to compete with DIRECTV's massive offerings.

In the most recent quarter, DTV's revenue jumped +10% to $6.02 billion. Earnings reached $0.55 a share compared with $0.37 per share a year earlier. Earnings were in line with analysts' estimates of $0.55 per share, and revenue exceeded the expected $5.98 billion. DIRECTV's profit rose +31% to $479 million, up from $366 million in the third quarter of 2009. I expect the company to end the year strong and deliver nice profits for your New Year.

Testing giant: If you didn't know, November is National Diabetes Awareness Month. And this November, I have a great buy for you in this area. Novo Nordisk A/S (NYSE: NVO ) is a pharmaceutical manufacturer that yields a 1% dividend. NVO is one of the world's leading producers of insulin, which is used to treat diabetes.

In the most recent quarter, the company saw a +37% boost in profit, posting a $665.7 million profit compared with $485.6 million this time last year. Sales rose +26% compared with last year's third-quarter, reaching $2.9 billion. After the earnings report, NVO raised its fourth-quarter predictions. The company now expects full-year sales growth of 11% to 12%. Demographic trends and company direction point to a booming business for NVO and that makes it one of my top buys right now.

Louis Navellier does not own a position in any of the stocks mentioned here.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Stocks
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Louis Navellier

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