3 Predictions for Next Week

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

• I predicted that Mattress Firm (NASDAQ: MFRM) would close higher on the week. The bedding retailer had obliterated Wall Street's profit targets in its first three quarters as a public company, and everything was pointing to another strong report. Unfortunately, Mattress Firm's performance is causing shareholders to toss and turn. Profitability merely met expectations, and now Mattress Firm's outlook is for a lackluster holiday quarter. The stock got crushed, shedding 20% of its value on the week. I was wrong.
• I predicted that the tech-heavy Nasdaq would outperform the Dow Jones Industrial Average. (^DJI -0.05%). The market had a mixed showing last week. The tech-heavy Nasdaq closed 1.1% lower, while the Dow rose by 1%. I was wrong.
• My final call was for Oxford Industries (OXM 1.47%) to beat analyst profit estimates. The company behind the Tommy Bahama, Lilly Pulitzer, and Ben Sherman clothing lines had blown through analyst profit targets in each of its past four quarters, so momentum was on its side. Wall Street was settling on a profit of $0.21 a share, but Oxford scored net income of $0.19. I was wrong.

Zero out of three? Ouch! After going three-for-three in each of the two previous weeks, I proved brutally mortal this time.

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.Hovnanian will surprise the market with a profit
The housing industry has been bouncing back all year, but skeptics abound when it comes to Hovnanian Enterprises (HOV 1.40%). The homebuilder has managed to post back-to-back quarters of profitability, while Wall Street figured that Hovnanian would post a deficit each time.

Once again, analysts are banking on a quarterly loss of $0.06 a share out of the real estate developer when it posts on Thursday. That's a marked improvement from where it was a year earlier, but the pros don't think the profitability streak will continue.

Seasonal lull or not, the reports out of the housing industry have been encouraging. I could take the easy road here, arguing that Hovnanian will merely beat expectations. No. It's the holiday season. I'm going bold.

My first prediction is that Hovnanian will post a quarterly profit this 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 call 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 as we kick off the fourth quarter.

3. VeriFone Systems will beat Wall Street's earnings estimates
Some stocks are just flat out better than others.

VeriFone Systems (PAY) VeriFone is a leading provider of electronic payment solutions. The next time you're swiping plastic at a retailer checkout line, don't be surprised if the machine that's creating transactional friction with your credit or debit card bears the VeriFone name.

Another thing it does is make analysts look like perpetual underachievers. If analysts say the company earned $0.76 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.

Source: Thomson Reuters.

Things can change, of course. Many retailers have already spooked investors into bracing for ho-hum holiday results. Hurricane Sandy's cruel aftermath also held back a good chunk of transactions. However, VeriFone has been a consistent performer. You have to go back four years to find the last time VeriFone didn't land ahead of the pros. Everything seems to be falling into place for another market-thumping 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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