3 Predictions for This Week

I went out on a limb last week and came out with mixed results.

  • I predicted that shares of Zipcar (Nasdaq: ZIP  ) would rise on Tuesday. The country's leading car-sharing service has been up on blocks in recent weeks, and I figured a strong report would get Zipcar back on the road again. Alas, it wasn't to be. Zipcar's stock tumbled 14% after the company posted mixed quarterly results. I was wrong.
  • I predicted that the tech-heavy NASDAQ would outperform the Dow Jones Industrial Average (INDEX: ^DJI  ) . It's been a strong year so far for tech stocks relative to the more-diversified blue chips that make up the 30 Dow components. NASDAQ clocked in with a 1.65% gain, besting the Dow's 1.16% uptick. I was right.
  • My final call was for Baidu (Nasdaq: BIDU  ) to blow past bottom-line estimates by analysts, the way that China's leading search engine has done over the past few quarters. Well, Baidu's quarterly net income of $0.93 a share was just enough to beat out the pros parked at $0.91 a share. I was right.

Two for three? I know that I can do better than that.

Let me once again whip out my trusty, dusty, and occasionally accurate crystal ball to make three calls that may play out over the next few trading days.

1. Barnes & Noble will miss Wall Street's earnings estimates
Barnes & Noble (NYSE: BKS  ) reports its quarterly results on Tuesday morning. Don't hold out for a "happily ever after" ending. The holidays may be the one time of the year when the bookseller is really profitable, but things are changing.

Borders vaporizing its stores last summer may seem like an opportunity, but it's really a grim sign that demand for leafy books continues to decline. B&N is a legitimate player in digital distribution through its Nook e-readers and tablets, but margins are going to be murder there if it wants to keep up with Amazon's cutthroat Kindle ways.

Analysts see the retailer earning $0.92 a share for the quarter, but that's just too high.

2.The NASDAQ Composite will once again beat the Dow this week 
I'm pushing my luck on this particular call, but it's been an easy one to keep repeating the way investors are favoring fast-growing technology companies this year.

I just believe that this market is ripe for the tech-stacked secondary stocks to outpace the 30 mega-caps that make up the Dow Jones Industrial Average.

3. Dollar Tree will beat Wall Street's earnings estimates
I may not be so hot on Barnes & Noble surpassing expectations, but I have a rosier opinion of a different retailer landing ahead of analysts.

Dollar Tree (Nasdaq: DLTR  ) has been cashing in during the soft economy with its chain of dollar stores. Everyone wants to get more bang for their buck, and Dollar Tree aims to help shoppers do exactly that.

If analysts say that the company earned $1.58 a share in its latest quarter, I'll whip out a "greater than" sign. History's on my side!

One of my best tricks to beating the market is finding stocks that perpetually land ahead of the prognosticators. Let's go over the past year of earnings reports.

  EPS est. EPS Surprise
Q4 2010 $1.27 $1.29 2%
Q1 2011 $0.75 $0.82 9%
Q2 2011 $0.75 $0.77 3%
Q3 2011 $0.83 $0.87 5%

Source: Thomson Reuters.

There has been a trend with shoppers moving out of deep-discount retailers as the economy shows signs of life, but I believe that Dollar Tree's value proposition is an all-weather winner.

No passing the buck here -- everything seems to be falling in place for another strong quarter on the bottom line.

Three for the road
Well, that's three predictions right there. Let's see how I fare this week.

If you like to stay on top of what happens next -- and I'm guessing you do, because you're reading this article -- how about checking out Motley Fool's top stock for 2012? It's a free report, but only for a limited time so check it out now.

Longtime Fool contributor Rick Munarriz calls 'em as he sees 'em. He does not own shares in any of the stocks in this story, except for Zipcar. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.

The Motley Fool owns shares of Zipcar. Motley Fool newsletter services have recommended buying shares of Baidu and Zipcar. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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