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 LeapFrog (NYSE: LF  ) would close out the week higher. After dominating the lists of the hottest-selling toys during the holidays, it was easy to expect big things out of the maker of electronic education toys. LeapFrog did come through with a better-than-expected report. Net sales rose 16% and margins widened as operating income climbed 28%. However, the market wasn't wowed by the performance. Shares of LeapFrog inched 3% lower on the week. I was wrong.
  • I predicted that the tech-heavy Nasdaq would outperform the Dow Jones Industrial Average. (DJINDICES: ^DJI  ) . This has been a tricky call lately, so how did it play out this time? The Nasdaq closed 0.5% higher, pushed higher by a strong Friday for tech stocks. The Dow, on the other hand, clocked in with a decline of 0.1% on the week. I was right.
  • My final call was for OpenTable (NASDAQ: OPEN  ) to beat Wall Street's quarterly profit target. Despite a perpetually healthy flow of skepticism, the leading online dining reservations specialist continues to tack on new restaurants to its platform. OpenTable has also been consistently beating the prognosticators, and there's little reason to bet against OpenTable until that trend reverses itself. Analysts were looking for a profit of $0.43 a share. OpenTable came through with net income of $0.46. 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.Apple will close out the week higher
Shares of Apple (NASDAQ: AAPL  ) moved 5.3% higher last week as the company responded to calls for the tech giant to dig deeper into its pockets to return more of its money to stakeholders.

The rally has legs. Apple shares had gotten too cheap. Yes, Android is eating Apple's lunch, and margins may get pressured in the future, but valuing Apple based on its existing portfolio of products ignores its ability to innovate. The 2001 iPod, 2007 iPhone, and 2009 iPad show that the company can carve out new markets that didn't exist until Apple appeared.

Apple isn't likely to make any major announcements in the coming days, but investors were too hard on Apple in seeing the stock plummet more than 30% off last year's all-time highs. Apple isn't perfect, but it's a better value than cynics believe. My first call is for Apple to close the week higher.

2.The Nasdaq Composite will beat the Dow this week
Betting on tech over stodgy blue chips was a steady winning bet for me last 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 the results this earnings season aren't as bad as some worrywarts feared. 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. Michael Kors will beat Wall Street's earnings estimates
Some stocks are just flat-out better than others.

Michael Kors (NYSE: KORS  ) is the leading retailer of stylish apparel, handbags, and other accessories. It's easy to be skeptical as we head into the Hong Kong-based company's fiscal third-quarter report on Tuesday. Michael Kors' biggest rival saw its shares dive last month after a poorly received quarterly report. However, Michael Kors has been able to post strong growth even as other markets for luxury goods have sputtered lately.

Another thing it does is make analysts look like perpetual underachievers. If analysts say that the company posted a profit of $0.41 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

$0.09

$0.20

122%

Q4 2012

$0.16

$0.22

38%

Q1 2013

$0.20

$0.34

70%

Q2 2013

$0.40

$0.49

23%

Source: Thomson Reuters.

Things can change, of course. Fashion is fickle, and shoppers can head elsewhere for their designer needs. Customers can also grow more cost-conscious, especially as folks come to grips with smaller paychecks in 2013 in light of the payroll-tax stimulus reversal.

However, there are no signs that we're turning our back on the company. 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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  • Report this Comment On February 10, 2013, at 4:48 PM, demodave wrote:

    How exactly is Andriod eating Apple's lunch?!?

    Android sands Google nothing, and Apple earns a significant majority of the smart phone sector profit.

    That Android success story makes no sense.

  • Report this Comment On February 10, 2013, at 6:18 PM, TimKnows wrote:

    How will Apple ever go up unless there is another shareholder out there who needs to sue Apple's stupid management team again?

  • Report this Comment On February 10, 2013, at 6:36 PM, TMFBreakerRick wrote:

    Demodave, Android's gaining market share at Apple's expense. It doesn't matter whether or not Google profits from it. It's as if someone's offering lemonade for a dime and someone starts offering a slightly different lemonade for free next to them.

    If Android didn't exist Apple's margins wouldn't be contracting as they are now and will continue to in the coming quarters. I'm a bull on Apple for the value that the stock represents, but the days of arguing that Apple is immune to Android are over.

    Rick

  • Report this Comment On February 10, 2013, at 9:00 PM, baozebub wrote:

    TimKnows is a troll. Rick is spreading lies.

    Apple doesn't make garbage to compete with google and samsung. So in fact, google and samsung have 100% of the crapphone category. This category makes no money, but are good at getting the numbers. Advertisers are learning that clicks from android users aren't worth anything, lowering google's price per click.

    Google can command the herd, but only in the short run. The stampede has stopped.

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