3 Predictions for the New Week

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

  • I predicted that Glu Mobile (NASDAQ: GLUU  ) would close higher on the week. The publisher of mobile apps had seen its shares lose nearly half of its value over the past year, and Tuesday's earnings report seemed like a good time to tell its side of the story. Glu ended up posting a quarterly loss on declining revenue, restating its past three years of financials along the way. The stock fell 10% 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? Well, this wasn't a good week for stocks. The Nasdaq moved 0.8% lower, and the Dow managed to close 1.5% lower. I was right.
  • My final call was for Green Mountain Coffee Roasters (NASDAQ: GMCR  ) to beat Wall Street's income estimates in its latest quarter. The company behind the popular Keurig single-cup coffee brewer has been posting blowout quarterly results over the past year. I was banking seeing on the trend continue. Analysts were looking for a profit of $0.77 a share during the quarter, and it came through with net income of $0.82. The stock didn't move higher on the news, as revenue came in a bit light, but it was still a beat on the bottom line. 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. Tesla Motors will close lower on the week
There's no denying that Tesla Motors (NASDAQ: TSLA  ) is this year's market darling. If you'd taken the money that you were going to use to buy a Volt or a Leaf at the start of the year and invested it in Tesla, you'd have enough money now to buy a pair of Tesla Model S sedans.

However, even the hottest stocks take a breather. Tesla soared after a truly blowout quarter last week, but the stiff valuation should cool the stock after the latest short squeeze subsides. My long-term prognosis for Tesla is bullish, but I think it shifts into reverse over the next few days.

My first call is for Tesla to close lower on the week.

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 tech should be what carries us through the economic recovery. Yes, earnings reports have been rough in some places this season, but the long-term outlook is still quite favorable. 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. Brocade will beat Wall Street's earnings estimates
Some stocks are just flat-out better than others.

Brocade Communications (NASDAQ: BRCD  ) is a provider of networking storage solutions. Despite a share price that's been waffling about in the single digits for more than six years, Brocade has been able to carve out a cozy yet profitable living serving data-storage needs. It's also trying to position itself as a play on Big Data.

Another thing it does is make analysts look like perpetual underachievers. If analysts say that the company posted a profit of $0.12 a share in its latest quarter, I'll argue that it held up better than that. 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

$0.14

17%

Q4 2012

$0.14

$0.17

21%

Q1 2013

$0.16

$0.21

31%

Q2 2013

$0.15

$0.17

13%

Source: Thomson Reuters.

Things can change, of course. Brocade shares slipped in the latest quarter after the company provided uninspiring guidance, and analysts are targeting small declines in revenue and profitability for the period. Despite the Big Data push, Brocade isn't participating in the growth that many of those niche players are experiencing.

However, it's hard to argue against the trend. 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 August 11, 2013, at 5:32 PM, YARDBIRD6 wrote:

    I just don't feel comfortable with TSLA. battery life for 1, time to recharge, you can't plug it into the cigarette lighter, LOL, but the main thing is the car has to run on a series of batteries, more than 1, if one goes bad they probably won't do a load test on each one but make every effort to make you buy the whole series of batteries for one bad one. that supercharge of the batteries, I just don't buy that either. I remember the wet cell ones and all the pants I went through, i know these are dry cell but they will cost an arm and a leg to replace them all. in the business 14 yrs, know all the tricks, too!!!

  • Report this Comment On August 11, 2013, at 8:43 PM, StanO6 wrote:

    @YARDBIRD6, Model S has 8 year unlimited battery warranty. Read up on Lithium-ion. Different tech than you grew up with.

  • Report this Comment On August 12, 2013, at 3:14 AM, QQ007 wrote:

    @YARDBIRD6 Totally different technology. Great company. Different standards and ethics than the car companies we grew up with.

  • Report this Comment On August 12, 2013, at 3:17 AM, QQ007 wrote:

    Battery life is great, circa 235-285 on a charge. Much more than most people need in a single trip, let alone in a day.

  • Report this Comment On August 12, 2013, at 9:20 AM, ToddRLockwood wrote:

    @YARDBIRD6 The battery pack in the Tesla Model S uses over 7,000 individual lithium batteries, the same type used in rechargeable power tools. Tesla discovered ten years ago that this approach allows for the lowest heat buildup and the greatest safety. Each battery is individually fused for short protection. If a fuse blows, that battery simply drops from the circuit, and the rest of the pack keeps working without interruption. I've owned a Tesla for six months, and I can tell you that this is the best driving car to come along in decades.

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