3 Predictions for the New Week

This Fool sees a limb to go out on. And another. And another.

Jun 15, 2014 at 3:00PM

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

  • I predicted that RadioShack (NYSE:RSHCQ) would lose more than Wall Street was expecting. The small-box retailer of consumer electronics has gambled on emphasizing mobile products, but the bet hasn't paid off. It posted a loss of $0.97 a share from continuing operations, nearly double the red ink that the pros were forecasting. The stock got hammered. I was right.
  • The Dow Jones Industrial Average (DJINDICES:^DJI) had been clobbering the Nasdaq Composite through April and early May, but it's been the other way around in recent weeks. My second prediction was for the Nasdaq to beat the Dow on the week. It happened. The Nasdaq Composite shed 0.2% of its value on the week, but the Dow moved 0.9% lower. I was right.
  • My final call was for Christopher & Banks (NYSE:CBK) to beat Wall Street's income estimates in its latest quarter. The retailer of women's apparel had beaten analyst targets consistently over the past four quarters, and I was banking on a repeat performance. We saw it close out the quarter with a profit of $0.07 a share. Analysts had been projecting net income of $0.02 a share. I was right.

Three out of three? Awesome. I have now gone 11 for 12 over the past four 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. Sirius XM Radio will move higher on the week
Shorts are starting to feast on Sirius XM Radio (NASDAQ:SIRI), but that opens the door to a potential short squeeze. The country's lone satellite radio provider has made the most of its monopoly and is now a profitable and growing service provider with 25.8 million subscribers on its rolls.

Sirius XM has been one of the market's biggest winners since bottoming out five years ago, but the stock has been relatively stagnant lately. My first pick is for the stock to bounce back this week, as digital music rollouts and acquisitions help fuel a fire under the premium music industry.

2. Nasdaq will beat the Dow this week
I've routinely picked the tech-heavy Nasdaq Composite to beat the Dow Jones Industrial Average, and it was a bad bet through most of March and April, but it's been rolling in recent weeks. I'm going to stick with it again for a repeat performance. My second call is for the Nasdaq Composite to beat the Dow Jones Industrial Average for the week.

3. Red Hat will beat Wall Street's earnings estimates
Some stocks are just flat-out better than others. Red Hat (NYSE:RHT) is a provider of enterprise software based on Linux. Charging for solutions built on an open-source platform may seem like a flimsy model, but it gives customers support as they save some serious money over traditional corporate software solutions.

Another thing it does is make analysts look like perpetual underachievers. If analysts say the company rang up a profit of $0.33 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 2014

$0.32

$0.32

3%

Q2 2014

$0.33

$0.35

6%

Q3 2014

$0.35

$0.42

20%

Q4 2014

$0.37

$0.39

5%

Source: Thomson Reuters.

Things can change, of course. Outside of last year's fiscal third quarter, the beats have been narrow. It's also always possible that an improving economy may make companies interested in springing for more traditional solutions, even if that flies in the face of universal cost-cutting mandates. 

That's all stuff to keep in mind down the road, but not now. Everything seems to be falling into place for another market-thumping quarter on the bottom line.

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Rick Munarriz has no position in any stocks mentioned. The Motley Fool owns shares of Sirius XM Radio. 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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