Two Buys for a New Bull

05/26/2009 1:00 pm EST

Focus: STOCKS

Louis Navellier

Editor, Blue Chip Growth and Emerging Growth

Louis Navellier, editor of Blue Chip Growth, says the recovering economy make a new bull market likely, and he finds two stocks that could do well as markets rebound.

It's becoming increasingly difficult to deny that "glimmers of hope" and economic "green shoots" are emerging everywhere, and it's not unrealistic to expect positive GDP growth to return by the fourth quarter. Right now, cash on the sidelines is still remarkably high—up to 48% of the Standard & Poor’s 500's value. That means there is still plenty of fuel to feed the fire as confidence rises.

An aging population and a greater emphasis on preventive care are creating a high-growth opportunity for our first new Buy, Quest Diagnostics (NYSE: DGX), the leading provider of independent diagnostic testing in the US. It has built a network of more than 2,000 patient service centers across the country.

Quest provides everything from routine tests such as cholesterol checks and HIV screening to anatomic pathology testing. Quest directly serves doctors and hospitals, as well as corporations, government agencies and other clinical labs. [It] recently announced it has developed the first commercially available test to identify US patients infected with swine flu.

In the first quarter, the company's earnings rose 23.9% to $167.1 million, or 88 cents per share, compared with $139.6 million or 71 cents per share in the same quarter a year ago. On average, analysts were expecting earnings of 82 cents per share, so the company posted a 7.3% earnings surprise and sales that were in line with expectations. These are very solid results in an environment where most of Quest's primary customers have decided to perform more diagnostic testing in house to cut spending.

Quest raised its 2009 guidance to $3.65 to $3.75 per share, from its previous guidance of $3.50 to $3.70 per share. Analysts forecast earnings of $3.59 per share, so Quest's higher guidance was well-received. Portfolio Grader gives this stock an A. (It closed above $50 Friday.)

TD Ameritrade Holding (Nasdaq: AMTD) is an online retail brokerage that serves active traders, investment advisors, and long-term investors with services from traditional discount trading to advanced tools for more seasoned traders.

In its latest quarter, TD Ameritrade handled an average of 324,837 trades per day, which is 8% higher than the same period a year ago. Trading volume has also perked up because investor confidence is improving, which bodes well for its future earnings.

AMTD’s earnings declined 25.8% to $32 million, or 23 cents per share, and its revenue dropped 15.6% to $525.5 million compared with last year. But these results were in line with estimates, and investors got excited after the company reaffirmed its guidance for 2009.

TD Ameritrade recently repurchased 36 million shares of its stock for an average price of $11.88 per share. About 34 million of those shares were bought by [the family of Joe Ricketts], one of the company's original founders. When a company is buying back its own stock, this is a very good sign that it is confident of its future. (It closed above $17 Friday—Editor.)

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