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 Kinder Morgan (NYSE: KMI  ) would miss Wall Street's profit target. Analysts were expecting a profit of $0.35 a share out of the country's largest network of natural gas pipelines, but Kinder Morgan's past few quarters fell woefully short of expectations. It posted net income of $0.33 a share. 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 somewhat upbeat week for stocks. The Nasdaq moved 0.5% higher, and that was more than enough to beat the Dow and its 0.1% climb. I was right.
  • My final call was for Wells Fargo (NYSE: WFC  ) to beat Wall Street's income estimates in its latest quarter. The banking giant has been routinely beating Wall Street projections over the past year. I was "banking" on a repeat performance, even with mortgage originations waning in this volatile climate for interest rates. It came through by posting a profit of $1.00 a share, blowing past the $0.98 the pros were forecasting. I was right.

Three out of three? Awesome!

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. Netflix will close higher on the week
Netflix (NASDAQ: NFLX  ) reports quarterly results on Wednesday, and it's easy for investors to get scared. The leading video service posted blowout results three months ago, and the stock still took a beating after the initial pop higher.

The good news is that Netflix was trading much higher before its third-quarter report than it is now. The shares have still appreciated considerably over the past year, but it's trading well below its all-time highs. Another strong report -- and that's what it has usually been with Netflix these days -- should get the stock moving up again.

My first call is for Netflix to gain ground this 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, even if it's been a bad bet a few times lately. This is the time for Nasdaq's growth stocks to shine. January has historically been a good time for growth stocks, and 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. AMD will beat Wall Street's earnings estimates
Some stocks are just flat-out better than others.

AMD (NYSE: AMD  ) has gone from being a strong player in microprocessors to commanding a semiconductor presence in various consumer electronics. With November's launch of the Xbox One and PS4, it has chips in all three video-game consoles.

Another thing it does is make analysts look like perpetual underachievers. If analysts say the company posted a profit of $0.06 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

Q4 2012

($0.20)

($0.14)

30%

Q1 2013

($0.18)

($0.13)

28%

Q2 2013

($0.13)

($0.09)

31%

Q3 2013

$0.02

$0.04

100%

Source: Thomson Reuters.

Things can change, of course. We've seen several retailers post bleak results when it comes to how consumer electronics were selling this holiday shopping season. AMD has also just recently turned the corner of profitability, and slipping back into the red isn't out of the question.

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. Meanwhile, remember that the best investment strategy is to buy shares in solid businesses and keep them for the long term. In the special free report, "3 Stocks That Will Help You Retire Rich," The Motley Fool shares investment ideas and strategies that could help you build wealth for years to come. Click here to grab your free copy today.


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  • Report this Comment On January 19, 2014, at 8:46 PM, bluesky64 wrote:

    Rick,

    Great logic Your AMD call will be like shooting fish in a barrel.

    Let's take it one day at a time but consider here's a crystal ball 3 yr look at AMD agreed.

    AMD Analysis 2014 to 2017

    Prepared by Ken Luskin January 6, 2014

    http://www.scribd.com/doc/196611095/AMD-Analysis-2014-to-201...

    Additional to follow earnings.

    Thx for your support.

  • Report this Comment On January 20, 2014, at 5:47 PM, spwangsu wrote:

    Just read another article "AMD Probably Lost Market Share in Q4". It looks like these are from two difference organizations. How would you explain the split opinions in just another day?

  • Report this Comment On January 21, 2014, at 2:54 AM, ara1029 wrote:

    spwangsu: The negative AMD "article" you saw is simply from a nervous NVIDIA owner who is/has been frantically trying to talk down AMD for a while now, and failing miserably at that. He is biased toward NVIDIA.

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