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 Walgreen (NYSE: WAG  ) would close higher on the week. A smaller rival had posted blowout results earlier, and the climate was ripe for a strong showing out of the drugstore giant. It panned out that way. Walgreen rose 2.3% on the week, even after the Dow and S&P 500 slipped. 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 mixed week for stocks. The Nasdaq moved 0.7% higher, besting the Dow and its 1.2% slide. I was right.
  • My final call was for CalAmp (NASDAQ: CAMP  ) to beat Wall Street's income estimates in its latest quarter. The provider of wireless communications solutions has managed to come out ahead on the bottom line in each of the past few quarters, and I was banking on a repeat performance. CalAmp's profit of $0.19 a share was well above the $0.16 a share that analysts were targeting. I was right.

Three out of three? Sweet!

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
Tesla Motors (NASDAQ: TSLA  ) has been one of this year's hotter stocks.

Last week's battery module fire saw the shares slide. The story itself was overblown, and Elon Musk responded perfectly. As bad as the incident may seem, it would have probably been far worse if it a car with an internal combustion engine was impaled by a large metal object on the road.

However, the event did lead investors to wonder whether Tesla was really worth nearly $25 billion at this point in its growth cycle. Even an otherwise bullish analyst had to step on the brakes by pointing out that the valuation was overestimating the execution risk that Tesla faces in ramping up its presence.

I think Tesla's a long-term winner. I do. However, while Tesla has typically bounced back after a bad week, I don't think it will happen this time around.

My first call is for this 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 this economic recovery. 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. Costco will beat Wall Street's earnings estimates
Some stocks are just flat-out better than others.

Costco (NASDAQ: COST  ) is a leading warehouse-club chain. The company serves up bulk-sized savings to its growing membership base. Shoppers overlook the exposed ceiling beams and warehouse feel for the huge sums of money that they save on the way out.

Another thing Costco does is make analysts look like perpetual underachievers. If analysts say the company posted a profit of $1.46 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 Est.

EPS

Surprise

Q4 2012

$1.31

$1.39

6%

Q1 2013

$0.93

$0.95

2%

Q2 2013

$1.06

$1.10

4%

Q3 2013

$1.03

$1.04

1%

Source: Thomson Reuters.

Things can change, of course. Costco raised its membership prices two years ago, and there's always the fear that there's only so much a penny-pincher is willing to pay for a bargain. Despite Costco's historical all-weather appeal, one can never be entirely sure that customers won't move away from the warehouse club concept in general.

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 three predictions right there. Let's see how I fare this week. In the meantime, remember that the best investing approach is to choose great companies and stick with them for the long term. The Motley Fool's free report "
3 Stocks That Will Help You Retire Rich" names stocks that could help you build long-term wealth and retire well, along with some winning wealth-building strategies that every investor should be aware of. Click here now to keep reading.


Read/Post Comments (6) | Recommend This Article (3)

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 October 06, 2013, at 3:57 PM, StanO6 wrote:

    @RickMunarriz: You're on!

    TSLA (TeslaMotors) will end the week higher.

  • Report this Comment On October 06, 2013, at 4:51 PM, Ustauber wrote:

    @Rick

    I bet you love your writing job.

    You have 50% chance to be wrong and you have been wrong many times.

  • Report this Comment On October 06, 2013, at 5:09 PM, john2000young wrote:

    It was said that capitalization matter, so I have a special view to capitalization to share here.

    Here are numbers of famous ICE auto makers, and their capitalization with total.

    GM 50B

    BMW 52B

    F 67B

    vw 76B

    DAI 62B

    TM 202B

    HMC 69B

    HYU 20B

    Total 598B

    The only disruptive EV maker TSLA is only 22 B. It looked like EV is going to make ICE outdated and obsolete. By then, TSLA could be a 30 bagger.

  • Report this Comment On October 06, 2013, at 9:33 PM, highgrowthcarson wrote:

    Hey John -- few get this. Its really about the talent and tesla has a corner. 30 bagger? 1/10 in my estimation. which all by itself makes it a good investment here.

    10 bagger much more likely. Best investment ever at 35 -- still a good investment at 180.

  • Report this Comment On October 06, 2013, at 9:35 PM, luckyagain wrote:

    All of his predictions might be true and you can still lose money. The House Speaker says that he is not willing to raise the debt ceiling in order to punish the President. Not exactly what the stock market wants to hear.

    From what I have read, the tax intake for the Federal will not meet the obligations and there is no way to pick and choose what gets paid. Almost everything that gets paid by the Federal government is done automatically by the Treasury computers. Short of reprogramming the computers, it cannot pick and choose what to pay. So the payment spigot will be turned "on" until the incoming tax money is spent and the spigot will be turned "off". Then when more money comes in, the spigot will be turned "on" again until all of the money is spent again.

    Now anyone who has ever programmed computers will know that changing the current system is a huge change that would require many months to do. So the "stop" and "start" is the only thing that can be done.

  • Report this Comment On October 07, 2013, at 10:32 AM, Ustauber wrote:

    Lol

    Tesla up 3% this morning.

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