3 Predictions for the Week Ahead

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

  • I predicted that Chipotle Mexican Grill (NYSE: CMG  ) would close out the week higher. Pessimism heading into its quarterly report on Thursday seemed like fertile soil for a bounce. It wasn't to be. The burrito roller shocked investors by missing Wall Street's revenue and earnings forecasts. I was wrong.
  • I predicted that the tech-heavy Nasdaq would outperform the Dow Jones Industrial Average. (INDEX: ^DJI  ) . This has been a winning call lately, as faster-growing tech stocks outpace the Dow's 30 blue chips. The market got off to a healthy start before Friday's sharp drop. The tech-heavy Nasdaq closed nearly 1.3% lower. The Dow, on the other hand, managed to squeeze out a 0.1% gain on the week. I was wrong.
  • My final call was for Select Comfort (Nasdaq: SCSS  ) to beat Wall Street's profit target. The company behind the Sleep Number bed with air chambers that provide adjustable firmness had landed ahead of the prognosticators during every quarter over the past year. It seemed like a smart bet. It was. Select Comfort earned $0.46 a share, well ahead of the $0.41 analysts were expecting. I was right.

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.Netflix will close out the week higher
It's fashionable to bash Netflix (Nasdaq: NFLX  ) these days, and that makes it easy to play the contrarian.

The leading premium video service provider reports its latest quarter's results on Tuesday afternoon. It's easy to see why the stock has taken a beating over the past year. Analysts think Netflix will be lucky if it's even profitable. However, I think skeptics are underestimating the appeal of its streaming service both here and abroad.

The early rollout of its service into Scandinavia this past week should also make it easier for Netflix to reverse its earlier forecast of a small loss during the current quarter. I don't think it will be a perfect quarter, but I think the pessimism is too thick.

I see Netflix shares moving higher on the week.

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, and they will be reporting quarterly results in the coming days.

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 as we kick off the fourth quarter.

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

Ancestry.com (Nasdaq: ACOM  ) is the company behind the popular genealogy website where more than 2 million users pay to explore and expand their family histories. Another thing it does is make analysts look like perpetual underachievers. If analysts say that the company earned $0.49 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

Q3 2011

$0.35

$0.40

14%

Q4 2011

$0.34

$0.40

18%

Q1 2012

$0.23

$0.30

30%

Q2 2012

$0.41

$0.44

7%

Source: Thomson Reuters.

Things can change, of course.

There have been rumblings all year reporting that private-equity firms are eyeing Ancestry.com as an acquisition. Since the cancellation of NBC's Who Do You Think You Are? -- a prime-time show where celebrities delved into their ancestry via Ancestry.com -- investors have been wondering wheher the company will be able to keep its subscriber base going.

This hasn't been a problem so far, though. Everything 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.

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The precipitous drop in Netflix shares since the summer of 2011 has caused many shareholders to lose hope. While the company's first-mover status is often viewed as a competitive advantage, the opportunities in streaming media have brought some new, deep-pocketed rivals looking for their piece of a growing pie. Can Netflix fend off this burgeoning competition, and will it's international growth aspirations really pay off? These kinds of issues are a must-know for investors, which is why we've released a brand-new premium report on Netflix. Inside, you'll learn about the key opportunities and risks facing the company, as well as reasons to both buy and sell the stock. We're also offering a full year of updates as key news hits, so make sure to click here and claim a copy today.

Longtime Fool contributor Rick Aristotle Munarriz owns shares of Netflix. The Motley Fool owns shares of Ancestry.com, Chipotle Mexican Grill, and Netflix. Motley Fool newsletter services recommend Ancestry.com, Chipotle Mexican Grill, Chipotle Mexican Grill, and Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools don't 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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  • Report this Comment On October 21, 2012, at 10:41 PM, pauldeba wrote:

    Not sure what you're smoking, but Netflix growth has completely stalled. no one hasn't had it yet, the pool for domestic growth is gone. you apparently have never looked at their streaming library. It is horrible, and worse internationally. It is virtually impossible to go 6 months and not see everything you want to see.

    Scandinavia? Is that a joke, hypercompetitive, huge level of piracy, marginal population in 4 different countries, expensive. This will almost be as bad as Latin America. this idea that they can walk into a country with almost nothing to offer and say " hey, we're netflix, pay us a monthly fee". Sounds a lot like blockbuster 15-20 years ago. Blockbuster was a better model in most international markets, netflix streaming is an abomination, it's going up in flames.

    I suppose they could have one more good quarter, but I doubt it, considering the popularity of this year's Olympics for 3 of their Q3 weekends.

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