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 Hovnanian Enterprises (NYSE: HOV  ) would surprise the market with a profitable quarter. Analysts were bracing for a loss of $0.06 a share, but homebuilders have been posting market-thumping results lately. Well, the real estate developer posted a pre-tax loss of $84.2 million, but that includes $5.3 million in expenses for a debt exchange offer and an $87 million hit from extinguishing debt. Back those one-time items out, and Hovnanian came through with an adjusted pre-tax net profit of $8.2 million. I was right.
  • I predicted that the tech-heavy Nasdaq would outperform the Dow Jones Industrial Average. (DJINDICES: ^DJI  ) . This has been a tricky call lately, as the largest tech company has been falling out of favor. The market was soft last week, and the tech-heavy Nasdaq closed 0.22% lower. The Dow, on the other hand, dipped 0.15% on the week. I was wrong.
  • My final call was for VeriFone Systems (NYSE: PAY  ) to beat analysts' profit estimates. The provider of electronic payment solutions had blown through analyst profit targets in each of its past four quarters, so momentum was on its side. That didn't happen this time. Wall Street was bracing for an adjusted profit of $0.76 a share, and that's exactly what VeriFone earned. 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.Apple will close out the week higher
The market hasn't been kind to Apple (NASDAQ: AAPL  ) . The world's most valuable tech company has shed nearly 28% of its value since peaking above $700 just three months ago.

Is the drop warranted? Analysts are concerned that Apple is losing market share and facing a margin crunch. They're talking down the company's near-term earnings prospects. These are the developments that warrant a cautious approach, but the sell-off is getting ridiculous.

Apple is too cheap right now, and you just know that it's going to break out on an aggressive share buyback plan or come clean about its smart TV plans. Either way, Apple has fallen too far, too fast.

My first prediction is that Apple will move 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. 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. Apogee Enterprises will beat Wall Street's earnings estimates
Some stocks are just flat-out better than others.

Apogee Enterprises (NASDAQ: APOG  ) is a provider of customized glass. Balancing aesthetics, energy efficiency, and element-tested durability, Apogee is a major player in glass window exteriors of high-rise corporate and residential buildings.

Another thing it does is make analysts look like perpetual underachievers. If analysts say the company earned $0.23 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 2012

$0.12

$0.20

67%

Q4 2012

$0.06

$0.11

83%

Q1 2013

$0.03

$0.06

100%

Q2 2013

$0.09

$0.17

89%

Source: Thomson Reuters.

Things can change, of course. Demand for Apogee's solutions are naturally susceptible to the ups and downs of commercial real estate. However, the market has been warming up to construction lately. Firming real estate prices, low mortgage rates, and encouraging employment trends are pointing to continuing improvement.

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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Comments from our Foolish Readers

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 December 16, 2012, at 3:23 PM, fender123 wrote:

    With Apple sales ripping through China over the weekend I am hoping this will silence the Apple pundits who seem to be paid very well by Samsung and Google.

  • Report this Comment On December 16, 2012, at 8:06 PM, joshsorensen wrote:

    There is no way you should consider your prediction on HOV to be a winner... They reported a loss and if you were on HOV's side pre earnings, you lost a boat load of money. If it was legitamate to remove the 1 time debts then why didn't the company do it on the earnings report and make it look like a "win" such as yourself? If you do not change the way you view that as a "win" then you sir are a shyster. Also, you are the only person at the Motley Fool whom I still trusted...Thank you for ruining that so that I do not ever have to come to this website again. #scam artests

  • Report this Comment On December 16, 2012, at 10:51 PM, TMFBreakerRick wrote:

    Josh, the company DID clarify it at the very top of its earnings report.

    "Reports First Quarterly Pre-Tax Profit, Excluding Gains or Losses on Extinguishment of Debt, Since the Industry Downturn Began in 2006."

    And I'm losing you on the boatload of money. The stock was at $5.25 a week ago when my column came out. The stock closed 1% higher on the week at $5.30.

  • Report this Comment On December 17, 2012, at 8:54 AM, joshsorensen wrote:

    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.

    That, Sir, is copied and pasted from your article. I will repeat, "My first prediction is that Hovnanian will post a quarterly profit this week."

    Hovnanian did not post a profit. They reported a loss. Yet you counted this as a win. It happened the opposite of the way that you predicted. The opposite of a win is a loss. Therefore, you were not right, you were wrong.

    I did not trade HOV, therefore I only watched to see what happened after hours when they reported their earnings.

    I am a man, I can admit I was wrong with my statement. Why, Rick, can you not do the same and just admit that you were wrong?

  • Report this Comment On December 17, 2012, at 8:56 AM, joshsorensen wrote:

    Also, HOV went down 10% in after hours trading the day they reported. Hence I did not look again and figured people lost a lot of money. As I said before I was wrong with that end.

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