Two Winners for the Post-Election Bounce

11/02/2010 1:00 pm EST

Focus: STOCKS

Louis Navellier

Editor, Blue Chip Growth and Emerging Growth

Louis Navellier, editor of Blue-Chip Growth, says the market should rally after the midterms, and he likes two stocks that have big overseas exposure and strong earnings momentum.

I don't want to sound too political here, but things are on the verge of changing in the House of Representatives and in the Senate. If predictions are correct, we'll likely see a split in the control of power in Washington, DC, as the legislative branch goes to the Republicans.

This is welcome news for Wall Street. When one party controls both the White House and Congress, it's much easier for the government to pass new legislation and change the regulatory environment, as it has done in the last two years.

When control is split between two parties, little change is accomplished. This gives companies the all-clear signal they've been waiting for, and unleashes a wave of corporate spending.

Corporate America has raised almost $500 billion in new debt, and the cash in corporate cookie jars is fast approaching $2 trillion. Businesses are impatient to unleash their money via capital spending after the elections, accompanied by even more dividend increases, stock buybacks, and mergers and acquisitions. This puts a firm foundation under the stock market.

We're also getting a nice boost from the falling dollar: [It] allows companies with more foreign sales to receive a greater amount of dollars when they exchange them from foreign currencies.

Deere (NYSE: DE) is the world's largest farm equipment manufacturer and a leading producer of construction, forestry, and commercial and residential lawn-care equipment. Unlike in Eastern Europe, where wheat production has slowed, US crops have surged in the past several months. Currently, the country is producing a record number of crop exports. The higher demand for crops is leading to a greater need for farm equipment.

Deere [also] stands to capitalize on high agricultural commodity prices. I see this as a great way to play the overall trend in higher food prices that is developing with the decline in the dollar.

[Analysts expect] Deere's quarterly sales [to] rise 31% and earnings [to] rise a whopping 300%! The company has a strong earnings surprise history. This stock will report earnings at the end of November. Add shares of this conservative stock under $84 before that time. (It closed Monday above $76—Editor.)

Magna International (NYSE: MGA) is a global supplier of automotive systems, components, and modules. The company provides services ranging from vehicle engineering and assembly to production of exterior trim and building interior door panels.

The past year has been good to Magna, with the opening of several new locations and new assembly contracts with major car brands like Aston Martin. The company's forecast continues to look sunny, with continued deals with GM and Ford and a stronger presence in the auto-hungry countries of South America on the way.

In the second quarter, the company's sales rose 63.1% to $6.05 billion, [while] earnings rose to $293 million, or $2.59 per share, from a loss of $205 million a year earlier. When the company reports earnings on November 5th, [analysts expect it] to post a sales increase of 13.7% and an earnings increase of 220%!

This is a great conservative Buy under $95. (It closed above $91 Monday—Editor.)

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