Merrill Lynch's Top Eight Catalyst Stocks to Buy for the Third Quarter

With the start of the third quarter, many firms on Wall Street are sifting through their stock coverage, looking to reset and offer solid ideas for the last half of the year. With the market still trading near all-time highs, the ability to pick names that still have solid upside comes at a premium for investors looking to stay long the market.

A new report from the analysts at Merrill Lynch presents eight ideas to buy that are companies that could have the most significant market and business related catalysts over the next three months. All of the stocks in the list are rated Buy and could produce significant gains if their specific catalysts do indeed play out.

None of these catalyst stocks to buy are momentum darlings, prone to huge swings. They are solid stocks with potential for increasing in price in the third quarter if earnings and other aspects play out as expected. In a high-priced market, these may be just the ticket to add to a portfolio where some profits have been taken.

In addition, as the third quarter is now beginning, here are the best performing DJIA stocks and the best performing S&P 500 stocks so far this year and of the second quarter.

Allison Transmission Holdings Inc. (NYSE: ALSN) kicks off the Merrill Lynch third-quarter catalyst list. Allison is the leading manufacturer of fully automatic transmissions and it benefits from rising demand for medium- and heavy-duty trucks. U.S. truck orders are growing as carriers continue to invest in replacing and expanding fleets in an effort to ease capacity constraints. A growing economy can also spur along more growth. Investors are paid a 1.5% dividend. The Merrill Lynch price target for the stock is $35. The Thomson/First Call consensus target is also $35. Shares closed Monday at $31.10.

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AutoNation Inc. (NYSE: AN) is one of the leading auto dealership conglomerates in the United States. The call at Merrill Lynch is for strong second-quarter new car sales and growing parts and service revenues (boosted by recalls). The analysts also see buybacks or acquisitions driving above-consensus earnings. The Merrill Lynch price target is $71, and the consensus is much lower at $51.74. AutoNation closed Monday at $59.68.