Two That Will Lead Tech's Next Boom

09/27/2010 1:00 pm EST

Focus: STOCKS

Louis Navellier

Editor, Blue Chip Growth and Emerging Growth

Louis Navellier, editor of Blue Chip Growth, says technology stocks are ready to lead the market’s next move higher, and he picks two he thinks will be particularly strong.

There are two forces that are about to come into play that will push the markets higher.

If you look at the aggregated market gains in each of the four years of a new President's term, you see that the biggest run-ups always start just before the beginning of the third year. The strongest "surge" during the Presidential election cycle is historically the next three quarters.

The second force that's kicking into high gear right now [that is] also going to provide a boost to the market [is] an unstoppable tech boom.

Tech has outpaced the rest of the market over the last two years: The Nasdaq Computer index, [which] tracks computer-based companies, over the last 24 months has risen more than 28%! This tech rally is the exact reason why our holdings have become more focused on tech.

NetApp (Nasdaq: NTAP) operates in a field that is becoming increasingly important to companies—data storage and security. NetApp develops products that help businesses store data securely and prevent such events.

The company's network-attached storage systems are designed for midsized to large enterprises. The company provides operating system, data management, and content delivery software, which it sells to customers in communications, energy, health care, manufacturing, and technology. Some of NetApp's biggest customers:  Boeing (NYSE: BA), Deutsche Telekom, and Yahoo (Nasdaq: YHOO).

In its latest quarter, NetApp's sales rose 36% year over year, to $1.14 billion. During the same period, the company's earnings rose 160% to $141.8 million, or [39 cents] per share. Excluding extraordinary items, the company's operating earnings were [49 cents] per share, [beating] analysts' expectations.

For the current quarter, the company's provided earnings guidance of [47 cents] and [50 cents] per share, excluding extraordinary items—on sales of between $1.16 billion and $1.21 billion. Buy NTAP below $53. (It closed just above $50 Friday—Editor.)

Salesforce.com (NYSE: CRM) develops applications that manage customer information for sales, marketing, and customer support. Now more than ever, companies need to know what their customers want at that exact moment in order to grab their attention.

Salesforce.com [creates] applications that generate sales leads, maintain customer information, and track customer interactions. More than 65,000 clients from a variety of industries, including financial services, telecommunications, manufacturing, and entertainment, use Salesforce.com's applications. Salesfore.com has also made its applications available via mobile phone.

In the second quarter, Salesforce.com's sales rose 24.8% to $394.4 million from the same quarter a year earlier, [topping] analysts' estimates for sales of $384.8 million. During the same period, the company's operating earnings rose to [29 cents] per share, [also] beating analysts' expectations of 27 cents.

Salesforce.com [also] raised guidance for 2011 to between $1.15 and $1.17 per share (from between $1.13 and $1.15 per share previously). Its yearly sales expectation also increased from between $1.55 billion and $1.56 billion to $1.6 billion. Buy CRM below $127. (It closed above $119 Friday—Editor.)

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