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 Baidu (NASDAQ: BIDU  ) would move higher on the week. China's leading search engine had gotten too cheap -- trading for less than 13 times next year's projected earnings -- and it seemed value investors wouldn't let this growth company get even more inexpensive. The markets did close marginally lower, but Baidu bucked the trend by climbing 1.7% higher on the week. 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, so how did it play out this time? It was one of the closest finishes in a long time. The Nasdaq and the Dow both closed with marginal losses. The tech-heavy Nasdaq inched 0.1% lower on the week, but the Dow managed to lose even less than that. I was wrong.
  • My final call was for Franchesca's Holdings (NASDAQ: FRAN  ) to beat Wall Street's quarterly profit target. The fast-growing operator of clothing boutiques has been a serial outperformer, blowing through Wall Street's bottom-line forecasts with ease over the past year. Analysts were looking for a profit of $0.30 a share during the quarter, and it came through with net income of $0.33. The market liked the report, sending the retailer's stock 7.4% higher on the week. I was right.

Two out of three? I know that 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.JA Solar will post a wider loss than Wall Street is expecting
These have been challenging times for solar energy companies, and few have felt the pain as badly as JA Solar (NASDAQ: JASO  ) . A couple of years ago, the maker of solar cells was very profitable, but JA Solar's been losing money since the summer of 2011. The worst part is that it's been posting larger deficits than Wall Street's been expecting.

This is a problematic trend, and even though analysts see JA Solar reporting a massive shortfall of $1.53 a share, the trend suggests that JA Solar's loss will be even larger. My first prediction is that JA Solar's report on Monday morning shows a greater deficit than analysts are forecasting.

2.The Nasdaq Composite will beat the Dow this week
Tech has been a big winner in recent years, so betting on tech over stodgy blue chips has been a good bet for me more often than not.

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 past earnings season weren't as bad as some worrywarts had 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. Mattress Firm will beat Wall Street's earnings estimates
Some stocks are just flat-out better than others.

When it comes to bedding retailers, Mattress Firm (NASDAQ: MFRM  ) is a sleeper pick. It's been acquiring smaller mattress sellers, taking advantage of its economies of scale to consolidate a fragmented retail niche. As bad as the economy can get, it's hard to put up with a lumpy mattress. Mattress Firm may have run into some challenges lately, but it continues to grow its empire at a heady pace.

Another thing it does is make analysts look like perpetual underachievers. If analysts say that the company posted a profit of $0.32 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 Estimat

EPS

Surprise

Q4 2011

$0.19

$0.63

232%

Q1 2012

$0.25

$0.31

24%

Q2 2012

$0.29

$0.42

45%

Q3 2012

$0.46

$0.47

2%

Source: Thomson Reuters.

Things can change, of course. Furniture stores and even some department-store chains are selling mattresses these days. Consumers can also hold back on buying new beds, especially now after this year's end of the payroll tax stimulus is giving homeowners less money to spend on things. Analysts also see profitability challenged at this point in Mattress Firm's growth cycle.

It's not comforting to see Mattress Firm barely beat the pros in its most recent quarter. However, it's hard to argue against the company until this trend reverses. 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.

The retail space is in the midst of the biggest paradigm shift since mail order took off at the turn of last century. Only the most forward-looking and capable companies will survive, and they'll handsomely reward investors who understand the landscape. You can read about the 3 Companies Ready to Rule Retail in The Motley Fool's special report. Uncovering these top picks is free today; just click here to read more.


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  • Report this Comment On March 24, 2013, at 5:23 PM, Foolsspin wrote:

    So glad you got it right on baidu on a 1.7% gain Koodoos for you! You know yourself that could be 5% down this week on Baidu.

    Now you can't wait on JA to report before you begin a hype. You seem nervous to me a bit!

    JA has the best debt to asset ratio compared to its peers. JA has cash of over $14.00 a share. Take over price is listed at over $614,000 Million.

    JA's balance sheet is $545 Million and lets not forget JA is expanding business in Japan where ASP's are higher. Trend is suggesting where JA sales its OEM products such as Japan will likely be #2 in Solar Installations for 2013. China will be #1 overtaking Germany by a long shot. JA's shipments are also 25% higher for the 4'th quarter than original projections. Lets remember Guidance will be an important factor.

    Motley said to sell Vonage within 2 months Vonage almost tripled in price. Since then I don't listen much to what they say!

  • Report this Comment On March 25, 2013, at 5:55 PM, TMFBreakerRick wrote:

    Well, the JASO call also proved correct with the stock down by a little more than 10% after badly missing estimates today.

  • Report this Comment On May 16, 2013, at 4:12 PM, Foolsspin wrote:

    Well NO, Not Exactly TMF JA Filing 20-F JA's 4'th Qtr. loss was almost cut in half from what was reported.

    Instead JA lost 1.37, Beat on revenues by atleast 20 Million. The reported loss was 2.65 but after revisions were made their lost was nearly cut in half 1.37. The expected loss was 1.30.

    These are things Motley never tells you about. You have to do your own DD.

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