I'm dusting off my crystal ball with confidence this time. After going roughly 8 1/2-for-9 on my predictions for 2009, it's easy for me to get cocky.
It's also just as easy to fall into the same trap of visionaries who nail the market one year, only to be nailed by the market the year after.
So let's dive in, cautiously optimistic but fully aware that the chances of a perfect read of the market in the year ahead are slim.
1. Stocks will rise in 2010
When I called for stocks to gain ground in 2009, it was a contrarian bet. Financial stocks were triggering a domino effect across all equity markets. It was a dark time, with major banks and car manufacturers on the brink of collapse.
Suggesting that stocks will add to their gains in the year ahead doesn't feel so gutsy at first. The market's been rolling since mid-March. The economy is showing signs of life. However, I still see my optimism as a contrarian play.
Nearly everyone expects the Federal Reserve's relaxed stance in monetary policy to end at some point next year. Once rates begin to inch higher -- likely during the second half of the year -- savers who turned to stocks in frustration over their measly money market returns will rotate back into short-term fixed-income securities.
There is also the growing concern that the past nine months of stock gains have left share prices making promises that their fundamentals can't keep. There are still plenty of companies posting lower year-over-year earnings than their already depressed 2008 levels. The signs are also there that the rally of 2009 is tiring out as it huffs and puffs its way to the finish line. Leading discount broker Charles Schwab (NASDAQ:SCHW) recently talked down its near-term prospects after its trading volume dried up in November.
I don't see monstrous returns in 2010, but stocks still have plenty of room to go in making up the ground they gave up during this lost decade. Broken companies continue to make strides in running tighter ships. Dell (NASDAQ:DELL) is a laggard in its industry, but the fallen darling is in the process of trimming $4 billion -- yes, with a "b" -- in annual operating costs. Other companies making similar moves will make their eventual recoveries explode skyward on their bottom lines.
2. Sirius XM Radio will gain ground in 2010
My Sirius XM Radio (NASDAQ:SIRI) call for 2009 was that the satellite-radio operator wouldn't file for bankruptcy protection. That may seem obvious now, but the situation certainly seemed dire for Sirius XM last December. Even CEO Mel Karmazin braced investors for the possibility in February, before Liberty Capital (NASDAQ:LCAPA) stepped in as a sugar daddy to get the media company past its debt-repayment roadblock.
We've heard mostly good news out of the Sirius XM camp ever since. The stock has appreciated nearly fivefold year to date, making it one of the market's sweetest surprises.
After the stock's torrid run this year, it would be natural to expect a little exhaling in 2010. Well, I don't. Sirius XM is gaining subscribers again, despite the recent introduction of new fees. The auto market appears to have bottomed out, and consumers will have more discretionary income to spend as we claw our way out of the recession.
Sirius XM is unlikely to be another five-bagger in 2010. It has way too many shares outstanding to command the implied enterprise value, especially once you tack on Liberty Capital's 40% stake in preferred stock. Sirius XM may not even top the $1 mark necessary to appease Nasdaq's listing requirements.
It won't have to. With its stock at $0.58 a share, the stock can still rise 30%, 50%, and even 70% before hitting the $1 mark this year -- handily beating the market.
3. Google will beat gold again
One of my spunkier 2009 predictions called for Google (NASDAQ:GOOG) to outpace gold. My call was a runaway winner. Gold may be up roughly 25% this year, but the world's leading search engine has treated investors to headier gains. Google has doubled since starting out the year perched at $307.65.
I see a repeat performance, though obviously not another double, in Google's cards.
Analysts see Google's revenue and earnings growing by 17% and 16, respectively, in 2010. And this kind of growth is not just a Big G thing. Smaller rivals Yahoo! (NASDAQ:YHOO) and Ask.com parent IAC (NASDAQ:IACI) are also pegged to post improvement on the top and bottom lines.
In other words, there's a general consensus that 2010 will deliver an uptick in demand for paid-search advertising. Can the same be said about gold?
Google's stock isn't the screaming value it was a year ago, although it's trading well below historical valuation metrics. Again, can the same thing be said about gold?
I'll take Google again, please.
I'll be back next week with even more predictions for 2010. It's your turn now. Share your market calls for 2010 in the comment box below.
