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 Sourcefire (Nasdaq: FIRE  ) would close higher on Wednesday. The network security specialist had beaten Wall Street profit targets by 27% or better over the past year, and I figured that a strong quarterly report on Tuesday night would move the stock higher. It didn't work out that way. Sourcefire did manage to serve up a better-than-expected quarterly profit, but an otherwise problematic report sent the stock nearly 17% lower on Wednesday. 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 clawed back during the second quarter. How will the third quarter play out? Well, the market got off to a rough start. Both gauges inched lower in each of the week's first four trading days, but a strong rally on Friday pushed both market metrics slightly higher on the week. The Dow clocked in with a 0.2% gain on the week, but the tech-heavy Nasdaq managed to move 0.3% higher. I was right.
  • My final call was for Liquidity Services (Nasdaq: LQDT  ) to beat what Wall Street analysts were forecasting on the bottom line in its latest quarter. The provider of online marketplaces for surplus and salvage assets has been consistently landing ahead of where Wall Street's expectations are perched over the past year. Liquidity Services' adjusted profit of $0.56 a share surpassed the $0.47 a share that 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. Sirius XM Netflix will close out the week higher
This is going to be a big week for Sirius XM Radio (Nasdaq: SIRI  ) . The only game in town when it comes to satellite radio reports its latest quarterly financials on Tuesday. Sirius XM already reported encouraging subscriber metrics for the second quarter, so most of the good news is already out.

However, there's a battle for control taking place at Sirius XM. There have also been encouraging signs in new auto sales, making it highly unlikely that the media giant will serve up disturbing near-term guidance. 

Sirius XM has been trading in a tight range in recent weeks, and a strong quarterly report and conference call may be just the thing to move the shares higher.

My first prediction is that Sirius XM will close out the week 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 this 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 megacaps that make up the Dow Jones Industrial Average.

3. SodaStream will beat Wall Street's earnings estimates
Some stocks are just flat-out better than others. One of those perpetual market thumpers is SodaStream (Nasdaq: SODA  ) .

Cynics love to bash the stock, arguing that the Israeli company behind the home-based soft-drink maker will be a passing fad. It doesn't seem to dawn on the skeptics that SodaStream's been gaining ground in Europe for years -- and that it's been gaining in popularity stateside since its rollout here two years ago.

Another thing the company does is make analysts look like perpetual underachievers.

If analysts say the company earned $0.46 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 $0.31 $0.42 36%
Q3 2011 $0.34 $0.56 65%
Q4 2011 $0.29 $0.32 10%
Q1 2012 $0.46 $0.55 20%

Source: Thomson Reuters.

Things can change, of course. Consumers can turn on sugary soft drinks for health reasons. SodaStream's product also has many strong features, but the value argument -- at least relative to house-brand pop -- isn't as strong as other home-based makers. It's still hard to bet against a company that has landed ahead of the pros by double-digit percentage margins every quarter over the past year.

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 SodaStream International. Motley Fool newsletter services have recommended buying shares of Sourcefire, Liquidity Services, and SodaStream International. We Fools may not 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.


Read/Post Comments (2) | Recommend This Article (15)

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On August 05, 2012, at 4:05 PM, doubting wrote:

    Rick,

    It appears that analysts are ignoring Mel's revenue update. Here is the math. In Q1, 2012 siri netted $805M in revenue. If we believe analysts' projection of $834M in Q2, this means that in Qs 3 and 4 siri will have to average $880.5M ($1,761B for both Qs).

    Based on the above, we can safely conclude two things. First, siri will beat Q2 revenue by up to $10M and most likely will produce 3 cents a share based on 700M fcf projection by the company (so far it was only $25M in Q1 and siri has to average $225M per Qs 2, 3 and 4) and second, analysts continue their adversarial campaign against the company.

    I believe that Sirius stock should soar on the Q2 results. The only thing that can be in its way is the liberty uncertainty. I will not be too surprised if this uncertainty is cleared next week. Siri's Q2 conference call is on Tuesday and liberty's shareholders meeting the following day. I wonder if this is a coincidence or not. Anyway, the week may turn out very exciting for siri longs.

  • Report this Comment On August 06, 2012, at 4:07 AM, lanceim59 wrote:

    If anyone is into small-cap high growth mining stocks, you should look into Woulfe Mining (TSX-V symbol: WOF or OTCQX symbol: WFEMF). Back in February 2012, Warren Buffet invested $80 million in Woulfe Mining which is one of the largest tungsten producers in the world! Tungsten is one of the hardest metals and is used for the tips of mining drills as well as jewelry. Woulfe Mining is projected to start production in the Sanddong Mine(one of the largest tungsten mine in the world) some time in 2013.

    http://www.moneymorning.com.au/20120613/why-warren-buffett-i...

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