I went out on a limb last week, and now it's time to see how that decision played out.
- I predicted that RadioShack (RSH +0.00%) would post a wider loss than expected. The struggling small-box retailer of wireless products and other consumer electronics was having a hard time keeping its red ink in check in recent quarters, and larger chains had already provided uninspiring snapshots of the niche. Well, the report was brutal. RadioShack's adjusted loss of $1.29 a share was far worse than the $0.13 analysts were forecasting. I was right.
- The Dow Jones Industrial Average (^DJI 0.44%) has been strong lately, but my second prediction still called for the tech-heavy Nasdaq Composite to outpace the Dow. It was close, but the Dow's 0.8% advance squeaked past Nasdaq's 0.7% gain. I was wrong.
- My final call was for Ambarella (AMBA +3.41%) to beat Wall Street's income estimates in its latest quarter. The provider of system-on-chip solutions for the HD camera industry has been riding high with its handiwork found in GoPro sports enthusiasts' cameras and Dropcam home security products. Ambarella closed out the quarter with an adjusted profit of $0.26 a share. Analysts had been banking on net income of $0.19. I was right.
Two out of three? I can live with that! I have now gone a solid 20 out of 24 over the past eight 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. Novavax will post a wider loss than expected
Novavax (NVAX 2.90%) is a widely traded maker of vaccines. It moved higher late last month after extending its contract with the U.S. Department of Health and Human Sciences to develop seasonal and pandemic influenza vaccines.
Unfortunately, Novavax is losing money, and analysts seem to underestimate the red ink. Wall Street has failed to nail its projections when it comes to Novavax, aiming for a much smaller deficit than what the vaccine maker ultimately reports.
Why get in the way of a long-running streak? My first call is for Novavax to post a wider quarterly loss than Wall Street's projecting this week.
2. The Nasdaq will beat the Dow this week
I've routinely picked the tech-heavy Nasdaq Composite to beat the Dow Jones Industrial Average, but I've been switching things out in recent weeks. I'm going back to my original call this time around, betting on a strong week for tech now that earnings season is starting to wind down. This approach didn't pan out for me this past week, but that won't deter me.
My second call is for the Nasdaq Composite to outperform the Dow Jones Industrial Average on the week.
3. magicJack VocalTec will beat Wall Street's earnings estimates
Some stocks are just flat-out better than others.
magicJack VocalTec (CALL +0.00%) is a provider of Web-based phone services. Consumers looking to save money have been ditching traditional landlines, and the VoIP pioneer has sold 10 million of its magicJack devices.
Another thing it does is make analysts look like perpetual underachievers. If analysts say the company posted a profit of $0.19 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 |
|---|---|---|---|
|
Q4 2012 |
$0.60 |
$0.95 |
58% |
|
Q1 2013 |
$0.51 |
$1.17 |
129% |
|
Q2 2013 |
$0.32 |
$0.49 |
53% |
|
Q3 2013 |
$0.42 |
$0.48 |
14% |
Source: Thomson Reuters.
Things can change, of course. Analysts are starting to catch up as the strength of the bottom-line beats have weakened in each of the past two quarters. This is a competitive market, and it bears pointing out that analysts see magicJack VocalTec earning less than half as much as it did a year earlier.
It's still hard to argue against the trend. Everything seems to be falling into place for another market-thumping quarter on the bottom line.
