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3 Predictions for Next Week

By Rick Munarriz - Apr 14, 2013 at 3:00PM

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This Fool sees a limb to go out on.

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

  • I predicted that Apple (AAPL -5.64%) would close higher on the week. The consumer-tech giant was approaching new lows, and it seemed as if the fears of its demise and hype over recently introduced smartphones were overblown. Apple shares benefited from a bullish week of trading, climbing 1.6% on the week. I was right.
  • I predicted that the tech-heavy Nasdaq would outperform the Dow Jones Industrial Average. (^DJI -3.57%). This has been a tricky call lately, so how did it play out this time? Well, the market rallied in a major way this week, with secondary stocks leading the way. The Nasdaq soared 2.8% on the week. The Dow managed to close just 2.1% higher. I was right.
  • My final call was for Apogee (APOG -0.95%) to beat Wall Street's quarterly profit target. The maker of value-added glass products for the architectural and picture framing industries has been beating Wall Street estimates consistently over the past year. Why should that end? Analysts were looking for a profit of $0.17 a share during the quarter, and it came through with net income of $0.15. I was wrong.

Two 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. People's United Financial will close lower on the week
Earnings season for bankers began on Friday, and the two financial-services titans that reported closed lower on the day. Many of their rivals will report in the week ahead, and that includes People's United Financial (PBCT).

The regional banker is a strong player in the Northeast. It's not just a survivor. People's United Financial has thrived, beating most of its rivals as a five-bagger on this side of the millennium. The stock's healthy yield hasn't hurt.

However, People's United Financial has come up short on the bottom line in back-to-back quarters. It has missed profit expectations in three of the past four quarters. This isn't a welcome trend in an earnings season where larger bankers have already set an unimpressive tone.

My call here is for People's United Financial to lose some ground by closing lower on the week.

2.The Nasdaq Composite will beat the Dow this week
Tech has been a big winner in recent years, so betting on tech over stodgy blue chips has been a good bet for me more often than not.

I'm going to stick with this pick. Most of the names in the composite are just too cheap at this point. 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.

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

United Rentals (URI -5.87%) is the leading equipment-rental company, with 836 outlets offering roughly 3,300 classes of construction and industrial equipment. Another thing it does is make analysts look like perpetual underachievers. If analysts say the company posted a profit of $0.47 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

Q1 2012

$0.05

$0.36

620%

Q2 2012

$0.57

$0.66

16%

Q3 2012

$1.12

$1.35

21%

Q4 2012

$1.01

$1.27

26%

Source: Thomson Reuters.

Things can change, of course. The construction boom can come to a halt. Industrial production can slow. Last week's reports of slipping consumer confidence and retail sales can't be very encouraging. However, given the way United Rentals has obliterated analysts' estimates with ease over the past year -- it hasn't even been close, really -- it's hard to bet against this trend.

Everything seems to be falling into place for another market-thumping quarter on the bottom line.

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

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Stocks Mentioned

Dow Jones Industrial Average (Price Return) Stock Quote
Dow Jones Industrial Average (Price Return)
^DJI
$31,490.07 (-3.57%) $-1,164.52
People's United Financial, Inc. Stock Quote
People's United Financial, Inc.
PBCT
United Rentals, Inc. Stock Quote
United Rentals, Inc.
URI
$273.40 (-5.87%) $-17.06
Apple Inc. Stock Quote
Apple Inc.
AAPL
$140.82 (-5.64%) $-8.42
Apogee Enterprises, Inc. Stock Quote
Apogee Enterprises, Inc.
APOG
$41.63 (-0.95%) $0.40

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

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