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 Microsoft (NASDAQ: MSFT  ) would close lower on the week. Steve Ballmer's surprising pending resignation led to a spike a week earlier, but it seemed overblown for a company that will struggle in the transformation from a software company to one that excels at products and services. Mr. Softy's stock took a 4% hit 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? Well, this was a bad week for tech stocks. The Nasdaq moved 1.9% higher, and that was worse than the Dow's 1.3% slip. I was wrong.
  • My final call was for OmniVision Technologies (NASDAQ: OVTI  ) to beat Wall Street's income estimates in its latest quarter. The maker of image sensors used in digital cameras, smartphones, and tablets has been cashing in on the popularity of portable computing gadgetry. It had also been posting blowout quarterly results over the past year. I was banking on seeing the trend continue. Analysts were looking for a profit of $0.43 a share during the quarter, and it came through with adjusted net income of $0.55. The stock fell on OmniVision's disappointing outlook, but it was still a beat looking back. 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
Everything seems to go right for Elon Musk these days, and Tesla Motors (NASDAQ: TSLA  ) shareholders are grateful. the maker of plug-in electric cars has seen its shares pop fivefold.

The future's bright for Tesla, but its $20.5 billion market cap seems a bit extreme for where it is in its life cycle. Against this backdrop, the market's showing plenty of volatility, making high-beta stocks vulnerable. Tesla has bucked the malaise so far. August was the market's worst month in more than a year, but Tesla had no problem moving higher. It hit a new high earlier this past week.

For a week, at least, Tesla's likely to be due for a breather. My first call is for this Wall Street darling 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. Earnings reports were rough in some places this past 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. Bazaarvoice will beat Wall Street's earnings estimates
Some stocks are just flat-out better than others.

Bazaarvoice (NASDAQ: BV  ) is a leading provider of social commerce solutions. More than 1,000 retailers lean on Bazaarvoice's data -- covering more than 400 million questions and experiences on roughly 20 million different products -- to drive sales, awareness, and customer loyalty.

Another thing it does is make analysts look like perpetual underachievers. If analysts say the company posted a loss of $0.08 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

Q1 2013

($0.14)

($0.07)

50%

Q2 2013

($0.10)

($0.07)

30%

Q3 2013

($0.12)

($0.06)

50%

Q4 2013

($0.13)

($0.12)

8%

Source: Thomson Reuters.

Things can change, of course. Bazaarvoice isn't profitable, so the beats so far have merely resulted in its posting a smaller loss than Wall Street was expecting. New projects or hiring sprees can bump costs and deficits higher. This is also a competitive market, as tech companies armed with data try to reach out to businesses.

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.

I'm not the only one making predictions around here! The Motley Fool's chief investment officer has selected his No. 1 stock for this year. Find out which stock it is in the special free report: "The Motley Fool's Top Stock for 2013." Just click here to access the report and find out the name of this under-the-radar company.


Read/Post Comments (2) | Recommend This Article (1)

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 September 01, 2013, at 4:31 PM, Tonymastodon wrote:

    Here you go again with your tesla predictions. You guys hype tesla up for months, then you sell it off. It continues to rise, then you talk them down. Weird, sellers regret?

    Give up on your tesla talk.

  • Report this Comment On September 01, 2013, at 10:57 PM, Nbull82 wrote:

    I predict TSLA will end the week in the low $170's

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2618559, ~/Articles/ArticleHandler.aspx, 8/31/2014 6:30:26 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement