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 Barnes & Noble (NYSE: BKS  ) would post a wider loss than what the market was projecting. The struggling bookseller had come up short more often than not lately, and it seemed like the smart call as the company continues to lose money on its low-priced Nooks. Well, the success of 50 Shades of Grey helps the superstore chain post a smaller deficit for the period. 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 it's been hit or miss during the past few months. The market was soft this week, with the tech-heavy Nasdaq shedding 0.2% of its value. The Dow managed to decline by 0.9%. I was right.
  • My final call was for Qihoo 360 (Nasdaq: QIHU  ) to beat Wall Street's profit target. The stock soared 24% on the week, but it wasn't necessarily its quarterly report that got the market pumped. Qihoo 360 is having some initial success with a proprietary search engine that's enchanting investors. The company ended up merely meeting the $0.17 a share that Wall Street was expecting on the bottom line. I was wrong.

One 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. Pandora will close out the week higher
Pandora Media (NYSE: P  ) is the leading provider of Internet radio, serving up more than a billion hours of music and comedy to folks on their PCs, smartphones, and Bluetooth-enabled cars. The company claimed 54.9 million active listeners by the end of July.

Pandora reports on Wednesday, and analysts see another small deficit out of the company. I'm not bold enough to predict an actual profit, though that could certainly happen. However, Pandora has a habit of saying the right things and announcing juicy milestones and brand-widening deals when it speaks.

Pandora went public at $16 last year, yet it begins this new week in the single digits. The recipe is right for a return to the double digits if the quarterly report impresses.

I see Pandora moving higher in the week ahead.

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 still think technology is the best sector to be invested in these days.

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.Vera Bradley will beat Wall Street's earnings estimates
Some stocks are just flat out better than others.

Vera Bradley (Nasdaq: VRA  ) turns heads with its stylish and occasionally colorful suitcases, handbags, and other travel accessories. The company went public at $16 two years ago, standing out as a consumer-facing IPO that's trading well above it debutante price.

Another thing it does is make analysts look like perpetual underachievers. If analysts say the company earned $0.35 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 $0.29 $0.34 17%
Q3 2011 $0.28 $0.32 14%
Q4 2011 $0.47 $0.50 6%
Q1 2012 $0.29 $0.31 7%

Source: Thomson Reuters.

Things can change, of course. We've seen travel portals posting uninspiring near-term guidance, and there's always a chance that a slowdown in travel would eat into Vera Bradley's sales. The economy is also showing that consumers are still fickle about when and where they want to spend their money.

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.

Motley Fool newsletter services have recommended writing puts on Barnes & Noble. 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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