A year ago, I went out on a frail limb and made five outlandish market predictions. They were all contrarian in the sense that they cut against the grain of conventional thinking at the time. Then I turned the floor over to you, compiling the feedback and promising accountability.
That's why I'm here -- now -- to go over my calls for 2005. I was dead wrong on two, perhaps three, of those calls. I nailed it on the other two. Let's go over all five.
Shares of Apple will fall in 2005
I knew that my first prediction would rattle the rabid Apple Computer (NASDAQ:AAPL) devotees. Apple was coming off an incredible quarter, and its shares had soared fivefold over the two previous years. The iPod was selling like hotcakes -- whatever that means -- and it was carrying over into brand awareness for Apple and grabbing market share in personal computing.
I have always been a big fan of Apple but figured the shares were ripe for a breather. How did that pan out? Well, Apple shares were at $69.88 when I made the call and closed the year at $71.89, so I wasn't really that far off.
What? What's that? Apple also had a 2-for-1 stock split back in February? OK, I'll admit it. I blew it big time on this one. Apple shares have more than doubled over the last year. My fatal mistake here was that I didn't give Apple enough credit for being on a hot streak, whipping analyst estimates. That's a trend that usually doesn't come to a screeching halt, and, as momentum would have it, Apple went on to smoke analysts four out of four times in fiscal 2005. So, yes, I blew it, and I won't do the contrarian thing and claim that Apple will go down for the count in 2006. Apple is too big, and all paths of media convergence will go through Apple at this point. Mea culpa, Apple. Rock on.
Reality 1, Me 0
Sirius will be signing up more new users than XM by year's end
I'm pretty proud that I nailed this one. Sirius Satellite Radio (NASDAQ:SIRI) had signed up just 440,000 subscribers during the December quarter of 2004, despite the buzz behind Howard Stern and Mel Karmazin. Rival XM Satellite Radio (NASDAQ:XMSR) had landed 700,000 more new listeners to its market-thumping digital army in the same period.
XM had a significant lead in number of subscribers. It commanded a larger share of auto market installations. All things being equal, XM was cheaper and offered dozens more channels. In fact, XM went on to become a recommended stock of the Rule Breakers newsletter service. However, I figured that the NFL and the Stern buildup would give Sirius a shot at a blowout holiday quarter, and it was exactly that. Sirius went on to tack on more than 1.1 million net new subscribers, while XM gained less than 900,000 new members.
Reality 1, Me 1
Krispy Kreme will bounce back
I let savory sentimentality get the best of me when I predicted that Krispy Kreme (NYSE:KKD) would close out the year as one of 2005's best- performing stocks. This was another blunder on my part. Krispy Kreme's shares went on to surrender another 37% of their value as scandal, executive defections, and a house of sugar-glazed cards came crumbling down.
Reality 2, Me 1
TiVo will bounce back
I'm a fan of TiVo (NASDAQ:TIVO). I'm a subscriber. I'm a believer. The fact that cheap knockoffs were hitting the market didn't sway me. The stock was at $4.11, and the market sentiment reflected that. However, as TiVo began striking licensing deals and weaning itself off the costly hardware business, the shares took off again. By May, TiVo stock was fetching as much as $7.75 per stub. Then, somewhat inexplicably, TiVo decided to go for broke and recommit to the hardware side.
So yes, TiVo did bounce back. It is now trading 25% higher than it was at this point last year. However, I don't feel comfortable claiming it as a full victory, so let's split the difference here.
Reality 2 1/2, Me 1 1/2
Amazon won't enter the DVD rental market alone
It doesn't seem all that bold a prediction by today's standards, but this may have been my most radical call at the time. A year ago, Amazon.com (NASDAQ:AMZN) was all but certain to enter the domestic DVD rental market. It had launched a similar service in the United Kingdom. Netflix (NASDAQ:NFLX) and Blockbuster Video broke out into a price war as a result of internal information received by Netflix that Amazon was readying a stateside rollout.
I didn't see it happening. Judging by Amazon's pricing strategy overseas, it just didn't make sense for Amazon to come in, build out the network of distribution centers that was necessary to provide overnight delivery of discs, and charge rock-bottom prices to get its foot in the door.
I was right. In fact, by the end of the year, the rumor going around was that Amazon was pondering a buyout of Netflix as an alternative to going it alone.
Reality 2 1/2, Me 2 1/2
How now, blackened crow
Nostradamus can rest easy. Clearly my 2005 calls were a mixed bag. When I was wrong, I was brilliantly wrong. It won't stop me from stepping back up to the podium next week and spouting off a new batch of 2006 calls.
It's the Rule Breakers way. The best way to beat the market is to ignore the rear-view mirror. Squint your eyes. Try to make out what the future has in store. Staying ahead of the market is the surest way to beat it. It's why the newsletter service looks to uncover the next great growth stock. Want to learn more so you know where I'm coming from with next week's market calls? Consider a free 30-day trial subscription.
See you next week, for now.
See you next year, for later.
Amazon.com, Netflix, and TiVo are Motley Fool Stock Advisor picks. For more stock ideas , click here.
Longtime Fool contributor Rick Munarriz doesn't mind laying it on the line. His goggles are coated with Teflon. He owns shares in Netflix but not in any of the other companies mentioned in this story. The Fool has a disclosure policy. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.
