3 Predictions for This Week

I went out on a limb last week, and now it's time to see how my calls played out.

  • I predicted that SodaStream (Nasdaq: SODA  ) would close higher on Wednesday. I was banking on a strong quarterly report out of the company behind the namesake maker of carbonated beverages. I thought the shares had dipped unfairly after the prior week's Keurig meltdown. SodaStream's history of landing ahead of Wall Street's profit targets was a good sign leading into Wednesday morning's report. Well, it was a blowout quarter. Shares of SodaStream roared 26% higher. I was right.
  • I predicted that the tech-heavy Nasdaq would outperform the Dow Jones Industrial Average. (INDEX: ^DJI  ) . This was a consistent winning call during the first quarter, but the Dow 30 has won most of the early rounds this quarter. Well, I caught a break this time. The Nasdaq took a nearly 0.8% hit during the week, but the Dow dropped 1.7%. I was right.
  • My final call was for priceline.com (Nasdaq: PCLN  ) to beat what Wall Street analysts were projecting on the bottom line in its latest quarter. Well, the "name your own price" travel portal flew high again. Adjusted earnings climbed 61% to $4.28 a share, landing well ahead of the $3.95 a share the market was expecting. I was right.

Three out of three? Let's keep going!

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. Groupon will close higher on Tuesday
Groupon (Nasdaq: GRPN  ) has been a punching bag for cynics since going public at $20 six months ago. The fact that it closed out the week at $9.90 -- more than 50% off -- is a headline that pretty much writes itself when it comes to the daily-deals leaders.

Well, Groupon reports its quarterly results on Monday night. The last time the company had some financial news to offer, it was a matter of revising its holiday quarter results lower on the heels of too many refunds.

The thing is, Groupon's revenue is still blazing. Wall Street's holding out for 40% revenue growth this year! The company has incurred losses, but they're happening as it expands globally and comes to grips with the pressures that have pushed many companies out of this niche.

Given the way the stock has been rocked in recent months, nervous investors will cheer even a so-so report. I like those odds leading to healthy gains the following trading day.

2.The Nasdaq Composite will beat the Dow this week 
Betting on tech over stodgy blue chips was a steady winning bet for me earlier this year. Investors have been nervously rotating out of the tech bellwethers in recent weeks, but it's just a matter of time before they come back. Tech is where the growth is.

The market is ripe for the tech-stacked secondary stocks to continue to outpace the 30 megacaps that make up the Dow Jones Industrial Average.

3. Home Depot will beat Wall Street's earnings estimates
Some stocks are just flat out better than others, and when it comes to home improvement, Home Depot (NYSE: HD  ) is the undisputed top dog.

Things haven't been easy for the do-it-yourself retailers. The real estate market crumbled alongside the financial markets, and for a long time there weren't too many people interested in sprucing up their homes. You can't blame them. Who would want to sink money into a house that the bank may take over?

We still have foreclosures galore, but home prices are starting to bottom out. As pent-up demand kicks in, home projects that have been delayed during the recession are starting to get tackled.

If analysts say the company earned $0.65 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.

Quarter EPS Estimate EPS Surprise
Q1 2011 $0.49 $0.50 2%
Q2 2011 $0.83 $0.86 4%
Q3 2011 $0.58 $0.60 3%
Q4 2011 $0.42 $0.50 19%

Source: Thomson Reuters.

Things can change, of course. We can remain a nation of renters. We can sink back into a recession. Or perhaps more problematically, mortgage rates can climb, sending home prices lower again. However, there are no signs that Home Depot will slow down now. Everything still seems to be falling into place for another strong quarter on the bottom line.

Three for the road
Well, there are 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 The Motley Fool's top stock for 2012? It's a free report, but only for a limited time so check it out now.

The Motley Fool owns shares of priceline.com and SodaStream International. Motley Fool newsletter services have recommended buying shares of priceline.com, Home Depot, and SodaStream International. The Motley Fool has a disclosure policy. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

Longtime Fool contributor Rick Munarriz calls them as he sees them. He owns no shares in any of the stocks in this story and is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.


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  • Report this Comment On May 13, 2012, at 3:21 PM, vanguardtrader wrote:

    "Given the way the stock has been rocked in recent months, nervous investors will cheer even a so-so report. I like those odds leading to healthy gains the following trading day"

    Your kidding me right?. Nervous investors will cheer a so-so report because the stock has fallen 50% percent from its highs. LOL. I can tell you a shoot from the hip guy. Hopefully you don't have too many followers.

  • Report this Comment On May 13, 2012, at 11:03 PM, limitbid wrote:

    so how much money did your priceline call make you from 718 down to 675? choosing outperformance why not choose a direction? good luck to you.

  • Report this Comment On May 14, 2012, at 12:29 PM, ajppaul wrote:

    What had happened with your recent recommendation of Makos? I would think you would have been more knowledgeable.

    AJP

  • Report this Comment On May 15, 2012, at 12:24 AM, TMFBreakerRick wrote:

    VanguardTrader, you were saying?

    Limitbid, I chose a direction on the SodaStream pick.

    AJP, Makos hasn't been mentioned in this weekly column.

  • Report this Comment On May 15, 2012, at 2:31 PM, lojikfool wrote:

    Thanks Rick, I agreed with your grpn call, and thanks to your prompt I just made 33% in 24hrs. I'm am investor not a ga mbler but we're allowed the occasional point right!

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