3 Predictions for the New Week

Our prognosticating Fool is going with three entirely new picks this week.

Feb 2, 2014 at 3:00PM

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

  • I predicted that Facebook (NASDAQ:FB) would close higher on the week. The social-networking website operator was reporting quarterly results, and its improving ability to monetize traffic has resulted in stronger-than-expected ad revenue in recent quarters. It happened again: Facebook came through with a blowout report, and the stock soared 15% in a week when the market fell. 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 stocks, but the Nasdaq's 0.6% dive was roughly half as bad as the Dow's 1.1% plunge. I was right.
  • My final call was for Cirrus Logic (NASDAQ:CRUS) to beat Wall Street's income estimates in its latest quarter. The developer of integrated circuits has been routinely beating Wall Street projections over the past year. I was banking on a repeat performance, and Cirrus came through by posting a profit of $0.89 a share, blowing past the $0.77 the pros were forecasting. The stock took a hit on Cirrus Logic's weak outlook, but it did beat on the bottom line. I was right.

Three out of three? Awesome! Don't look now, but I'm a perfect nine for nine over the past three weeks.

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. Zynga will close lower on the week
Zynga (NASDAQ:ZNGA) was supposed to post quarterly results on Thursday of this upcoming week, but it moved the report a week early so it could announce layoffs and an acquisition. The market liked the early announcement, sending the shares 26% higher on the week.

Zynga is still suffering from sharp declines in revenue and bookings. We've seen how acquisitions in the past of hot mobile properties eventually seem like bad bets when fickle gamers move on. Zynga's flush with cash, so it's not going away anytime soon, but the layoffs sound more like another round of surrendering than setting the stage for a turnaround.

My first call is for Zynga to close lower this week.

2. The Dow will bounce back this week
The market in general has been weak lately, but the Dow Jones Industrial Average itself has been getting pounded. After back-to-back weekly dives -- shedding 3.5% and another 1.1% over the past two weeks -- the 30 blue chips making up the index appear to be collectively correcting.

Enough! I have historically picked the Nasdaq to outperform the Dow in this slot, but this week I'm going even further out on my limb to predict that the Dow will close in positive territory on the week.

3. Green Mountain Coffee Roasters will beat Wall Street's earnings estimates
Some stocks are just flat-out better than others.

Green Mountain Coffee Roasters (NASDAQ:GMCR) is the company behind the Keurig brewing system that delivers one-cup servings of premium java and other beverages through its K-Cup portion packs. It has become the standard platform in single-serve coffee.

Another thing it does is make analysts look like perpetual underachievers. If analysts say the company posted a profit of $0.90 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

$0.65

$0.76

17%

Q2 2013

$0.74

$0.93

26%

Q3 2013

$0.77

$0.82

7%

Q4 2013

$0.75

$0.89

19%

Source: Thomson Reuters.

Things can change, of course. Green Mountain's patent protection on the K-Cup refills ran out in late 2012, and now it's competing against private labels that can legally offer unlicensed K-Cup portion packs. Revenue growth is projected to be the weakest in years as competition heats up. However, you also have lower coffee costs helping Green Mountain boost its profitability.

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 more for the road
Well, there are three predictions right there. Let's see how I fare this week. Meanwhile, don't forget that while investors tend to be impatient with the market, 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.

Rick Munarriz owns shares of Green Mountain Coffee Roasters. The Motley Fool recommends Facebook and Green Mountain Coffee Roasters and owns shares of Cirrus Logic and Facebook. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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