Two Blue Chip Stalwarts

01/29/2008 12:00 am EST

Focus: STOCKS

Louis Navellier

Editor, Blue Chip Growth and Emerging Growth

Louis Navellier, editor of Blue Chip Growth, says the economy may be slowing, but two multinational growth companies should hold up pretty well.

The credit crisis has put the economy into some really hot water. Consumers are reluctant to spend, and De­cember retail sales fell 0.4%, the first decline in sales in six months. In the December payroll report, job growth contracted for the first time in four years. Unemployment has risen from 4.7% to 5%, and I am sorry to say that any time the unemployment rate has risen 0.3% in a month since 1949, a recession has ensued.

Now let me tell you the good news. There is a light at the end of this dark economic tunnel, and we’re starting to see it.

On January 22nd the [Federal Open Market Committee] called an emergency meet­ing and cut the federal funds rate by 0.75%, to 3.5%. The larger-than-anticipated rate cut is sending a signal that the Fed means business. I expect the Fed will continue to cut the federal funds rate (short term interest rates) to 3.0% after its March meeting.

Naturally, our buy list is heavily invested in export- and dollar-related plays. Our multinationals will continue to post windfall earnings due to the dollar’s weakness and vast overseas operations.
 
You can’t get more American than a John Deere tractor, but ironically, global demand for Deere & Company’s (NYSE: DE) products is driving its success. One of the world’s largest makers of farm equipment, DE is also a leading producer of industrial, construction, forestry, and lawn-care equipment.

In November, Deere reported a 52% increase in quarterly earnings to $1.88 per share. Analysts only expected $1.55 per share, so Deere posted an out­standing 21.3% earnings surprise. In addition, the company foresees farm sales continuing at a double-digit pace well into 2008. The company is also raking in profits from the agriculture booms and gave positive fu­ture guidance.

Deere itself has posted strong sales and better-than-expected earnings due to robust operating margins. Get in on DE before its next earnings release on February 13th.  (The stock closed Monday above $85—Editor.)

EnCana (NYSE: ECA) is one of North America’s largest independent gas and oil producers. Based in Calgary, Alberta, EnCana has proven reserves of 12.4 trillion cubic feet of natural gas and 1.1 billion barrels of oil. It has a 50/50 partnership with ConocoPhillips in the heavy oil and tar sands business. Besides owning property in western parts of the US and Canada, the company is also exploring in Brazil, the Middle East, France, and Greenland.

As part of the ConocoPhillips deal, EnCana earned a 50% stake in ConocoPhillips’ Illinois and Texas refineries. At current crude oil prices, EnCana’s tar sands are extremely profitable. The company earned $1.24 per share in the third quarter, handily beating analysts’ $1.13 estimates. The company’s fourth-quarter earnings will be released on February 14th, and analysts are expecting $1.33 earnings per share. Despite tremendous sales and earnings growth, EnCana trades at less than 14x forecasted earnings! (It closed above $63 Monday—Editor.)

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