3 Predictions for This Week

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

  • I predicted that IMAX (NYSE: IMAX  ) would close out the week with a positive gain. Between the opening of The Amazing Spider-Man and strong box0office results year-to-date for most of the Hollywood movies being digitally remastered for IMAX screenings, I figured there would be more interest in buying than selling the stock. The shares hit a nearly two-month high early in the week, but the stock closed out the week with a small loss. I was wrong.
  • 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, the market had an uninspiring run. The Dow clocked in with a loss of 0.8%, and the tech-heavy Nasdaq managed to remain barely positive in inching 0.1% higher. I was right.
  • My final call was for Xyratex (Nasdaq: XRTX  ) to beat what Wall Street analysts were forecasting on the bottom line in its latest quarter. The data-storage company has been landing ahead of where Wall Street's expectations are perched over the past year. Xyratex's adjusted profit of $0.32 a share surpassed the $0.29 analysts were forecasting. I was right.

Two out of three? 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. Apple will close out the week higher
It took Apple (Nasdaq: AAPL  ) more than two months to regain the $600 mark. Now that it's here, it's time for the world's most valuable tech company to pad those gains.

After a springtime lull, technology stocks are regaining their swagger, and the Cupertino giant should lead the way. Even though the past few days have been ripe with headlines about another cheap Android tablet on the way and about rivals that are dropping operating-system prices, Apple's as strong as ever.

My first prediction is that Apple will close out the second week of July with positive gains.

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. This has been a losing bet lately, but I'm going to stick with the pick. Most of the names in the composite are just too cheap at this point.

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

3. Wolverine World Wide will beat Wall Street's earnings estimates
Some stocks are just flat-out better than others.

Don't tread on Wolverine World Wide (NYSE: WWW  ) . The footwear maker behind Hush Puppies, Sebago, Merrell, and several other shoe lines has soul in its soles.

Another thing it does is make analysts look like perpetual underachievers. If analysts say the company earned $0.44 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

Q2 2011 $0.46 $0.48 4%
Q3 2011 $0.75 $0.82 9%
Q4 2011 $0.45 $0.47 4%
Q1 2012 $0.55 $0.64 16%

Source: Thomson Reuters.

Things can change, of course. Analysts thought Wolverine World Wide would match last year's quarterly profit of $0.48 a share three months ago. The target dropped to $0.45 a few weeks later, and earlier this month it fell again to $0.44. It's not a comforting trend to see analysts adjusting their profit forecasts lower.

However, there are no signs that the company will fumble this quarter to the point of failing to live up to Wall Street estimates. 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 Fool owns shares of Apple. Motley Fool newsletter services have recommended buying shares of IMAX and Apple and creating a bull call spread position in Apple. 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. The Motley Fool has a disclosure policy.


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  • Report this Comment On July 09, 2012, at 1:51 AM, MrSinnister wrote:

    When will Discovery Labs (DSCO) finally get some love and a prediction writeup? I mean they have 2 FDA approved products that go into distribution in the 4Q, with the FDA approval coming in March. They only have 43 million outstanding shares, with a current market cap of 125M which nearly multiplies with every 10 cent increase. They are going to distribute a drug for Respiratory Distress Syndrome for infants in the US and European markets, and they have TREMENDOUS upside, already up 60 percent on the year. Add to that two more drugs awaiting approval, Aeroserf, that is in a collaboration with Batelle to get streamlined and fine-tuned and Surfaxin LS, a liquid version of their already FDA-approved drug Surfaxin. How this stock stays in the 2 range is amazingly shortsighted.

    Value of Surf LS + Afectair: 275million

    Shares O/S: 43mil

    Tell me why we can't see $40+/share with DSCO. Note that my sell target is below this, but I expect the stock to soar once it gains momentum. Imagine that liquid surfaxin penetrates the market quickly and gets great reviews by practicing docs (which it should). Surf LS will be even better. And Aerosurf even better after that.

    Facts:

    1. one approved device

    2. one approved drug

    3. $40 million in cash

    4. no debts

    5. no preferred stocks

    6. no impending warrants (outside of the 5yr 5M at 2.80)

    8. exclusive rights

    9. excellent pipeline

    10. Newly partnered (Batelle for R&D)

    11. MAA approval soon

    12. New device new drug launch soon

    13. Mkt Cap 128 million ???

    At 3 times sales, this is already $400 million firm, and that is $10 PPS. DSCO === Hidden Gem.

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