Please ensure Javascript is enabled for purposes of website accessibility

3 Predictions for the Week Ahead

By Rick Munarriz – Oct 21, 2012 at 3:00PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

This Fool sees a limb to go out on, and he's the adventurous type.

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

  • I predicted that Chipotle Mexican Grill (CMG -1.64%) would close out the week higher. Pessimism heading into its quarterly report on Thursday seemed like fertile soil for a bounce. It wasn't to be. The burrito roller shocked investors by missing Wall Street's revenue and earnings forecasts. I was wrong.
  • I predicted that the tech-heavy Nasdaq would outperform the Dow Jones Industrial Average. (^DJI 0.00%). This has been a winning call lately, as faster-growing tech stocks outpace the Dow's 30 blue chips. The market got off to a healthy start before Friday's sharp drop. The tech-heavy Nasdaq closed nearly 1.3% lower. The Dow, on the other hand, managed to squeeze out a 0.1% gain on the week. I was wrong.
  • My final call was for Select Comfort (SNBR -3.18%) to beat Wall Street's profit target. The company behind the Sleep Number bed with air chambers that provide adjustable firmness had landed ahead of the prognosticators during every quarter over the past year. It seemed like a smart bet. It was. Select Comfort earned $0.46 a share, well ahead of the $0.41 analysts were expecting. I was right.

One out of three? I can do better than that.

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 out the week higher
It's fashionable to bash Netflix (NFLX -1.03%) these days, and that makes it easy to play the contrarian.

The leading premium video service provider reports its latest quarter's results on Tuesday afternoon. It's easy to see why the stock has taken a beating over the past year. Analysts think Netflix will be lucky if it's even profitable. However, I think skeptics are underestimating the appeal of its streaming service both here and abroad.

The early rollout of its service into Scandinavia this past week should also make it easier for Netflix to reverse its earlier forecast of a small loss during the current quarter. I don't think it will be a perfect quarter, but I think the pessimism is too thick.

I see Netflix shares moving higher on the week.

2.The Nasdaq Composite will beat the Dow this week
Betting on tech over stodgy blue chips was a steady winning bet for me earlier this year. This has been a losing bet lately, but I still think technology is the best sector to be invested in these days.

I'm going to stick with this pick. Most of the names in the composite are just too cheap at this point, and they will be reporting quarterly results in the coming days.

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 as we kick off the fourth quarter.

3.Ancestry.com will beat Wall Street's earnings estimates
Some stocks are just flat-out better than others.

Ancestry.com (ACOM) is the company behind the popular genealogy website where more than 2 million users pay to explore and expand their family histories. Another thing it does is make analysts look like perpetual underachievers. If analysts say that the company earned $0.49 a share in its latest quarter, I'll whip out a "greater than" sign. 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

Q3 2011

$0.35

$0.40

14%

Q4 2011

$0.34

$0.40

18%

Q1 2012

$0.23

$0.30

30%

Q2 2012

$0.41

$0.44

7%

Source: Thomson Reuters.

Things can change, of course.

There have been rumblings all year reporting that private-equity firms are eyeing Ancestry.com as an acquisition. Since the cancellation of NBC's Who Do You Think You Are? -- a prime-time show where celebrities delved into their ancestry via Ancestry.com -- investors have been wondering wheher the company will be able to keep its subscriber base going.

This hasn't been a problem so far, though. Everything seems to be falling into place for another strong quarter on the bottom line.

Three for the road
Well, there are three predictions right there. Let's see how I fare this week.

If you like to stay on top of what happens next -- and I'm guessing you do, because you're reading this article -- how about checking out The Motley Fool's top stock for 2012? It's a free report, but only for a limited time, so check it out now.

Longtime Fool contributor Rick Aristotle Munarriz owns shares of Netflix. The Motley Fool owns shares of Ancestry.com, Chipotle Mexican Grill, and Netflix. Motley Fool newsletter services recommend Ancestry.com, Chipotle Mexican Grill, Chipotle Mexican Grill, and Netflix. 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.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Netflix, Inc. Stock Quote
Netflix, Inc.
NFLX
$224.07 (-1.03%) $-2.34
Ancestry.com LLC Stock Quote
Ancestry.com LLC
ACOM
Dow Jones Industrial Average (Price Return) Stock Quote
Dow Jones Industrial Average (Price Return)
^DJI
$29,590.41 (0.00%) $0.00
Chipotle Mexican Grill, Inc. Stock Quote
Chipotle Mexican Grill, Inc.
CMG
$1,531.99 (-1.64%) $-25.53
Sleep Comfort Corporation Stock Quote
Sleep Comfort Corporation
SNBR
$34.08 (-3.18%) $-1.12

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
327%
 
S&P 500 Returns
105%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 09/27/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.