Two weeks ago, I pointed out three tiny companies I thought would make huge moves. Over the course of the next week -- on the specified day -- those stocks averaged moves of 12%.
Is this evidence that we here at The Motley Fool possess a crystal ball? Though I'd like to think so, the honest answer is, decidedly, no.
Instead, all three of these stocks shared three key characteristics: They are comparatively small companies, they have lots of investors betting against, or shorting, their short-term future, and they reported earnings. When these three variables combine, wild swings, up or down, are highly likely.
So does this mean we encourage using these short-term movements to try and time the market and make a quick fortune. Again, the answer is decidedly "no!"
Instead, these articles hope to prepare investors, especially beginners, for wild swings in their stocks in the coming week. This week, I've identified three more stocks that are primed for big moves: lululemon athletica (LULU 3.04%), GameStop (GME 1.30%), and Lindsay Corporation (LNN 2.38%).
|
Company |
% of Shares Short |
When? |
Expected Revenue (Millions) |
Expected EPS |
|---|---|---|---|---|
|
Lindsay |
37% |
Wednesday |
$165 |
$1.15 |
|
Lululemon |
20% |
Thursday |
$518 |
$0.73 |
|
GameStop |
29% |
Thursday |
$3,800 |
$1.93 |
Sources: Finviz.com, E*Trade.
Source: Wikimedia Commons.
Lindsay Corporation, which makes center-pivot irrigation systems like those seen in the photo, is no stranger to this list. Last year, the company was also heavily shorted and came out with earnings that disappointed investors and sent the stock down 6%.
Zooming out a bit more, shares of the company are down about 13% over the past year -- though investors are now benefiting from a dividend that's twice the size now than it was just one year ago.
The main reason so many are shorting the company's stock is that there are two things happening that are generally good for everyone but Lindsay. Last year, drought stayed away in the Midwest, and crop prices were lowered on record yields. When that's the case, farmers both have less need, and less money, to buy Lindsay's irrigation products.
Pay close attention to the company's estimates to get a feel for what 2014 could hold in store. And remember, despite our best efforts, weather predictions over any one year are impossible to forecast with 100% certainty.
Coming out of the Great Recession, Lululemon was the market darling that defied all expectations. Growing in popularity based on a unique advertising model and a mission that seemed to reach far beyond simply making profits, the company's stock boomed 2,700% between March 2009 and last July.
But then, a series of missteps caused it to draw the public's ire. First, the company's popular brand of luon pants had to be recalled for being ... well ... see-through. Then, founder and then-board member Chip Wilson blamed the recall on women who were too heavy to be sporting Lulu gear. Obviously, that didn't go over too well. And finally, popular CEO Christine Day announced her resignation in late 2013.
Since then, the company has gotten former Toms Shoes exec Laurent Potdevin to come on as CEO. Investors will be watching closely to see what moves Potdevin and the company make to reverse their fortunes -- though Fools should remember that it usually takes more than one quarter to right the course of a company that's gotten a little lost.
It shouldn't come as too much of a surprise to see GameStop in short-sellers' crosshairs. Increasingly, video game companies are migrating their business models to the cloud, instead of relying on the purchase of physical games in stores. That ruins GameStop's original business model.
But those who have bet against GameStop over the past two years have suffered for it. Last year alone, the stock surged almost 130% through November, and started paying a hefty dividend.
But the writing may already be on the wall. Both Sony and Microsoft have subscription services that are gaining users, and that could be the beginning of the end game for GameStop.
