3 Predictions for This Week

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I went out on a limb last week and came out with mixed results.

  • I predicted that government contractor SAIC (NYS: SAI) would close out the week lower. The company had missed badly in its two previous quarters -- and it did wind up coming up short in last week's report. However, income investors moved in as SAIC initiated a dividend policy. The stock climbed 1.2% higher on the week. I was wrong.
  • I predicted that the tech-heavy Nasdaq would outperform the Dow Jones Industrial Average (INDEX: ^DJI) . It's been a strong year so far for tech stocks relative to the more diversified blue chips that make up the 30 Dow components. Last week was the first down week for the Dow in a long time, as the blue-chip index fell by 1.1%. Nasdaq, on the other hand, remained positive with a 0.4% gain. I was right.
  • My final call was for Discover Financial Services (NYS: DFS) to swipe its way past the pros on the bottom line. Well, the financial-services giant blew Wall Street away. Net income of $1.18 a share was more than enough to beat out the pros at $0.94 a share. I was right.

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. Lions Gate Entertainment will close out the week lower
Lions Gate (NYS: LGF) has a monster hit on its hands, judging by this weekend's blowout numbers for The Hunger Games. The rub is that the strong showing was already baked into a stock that has more than doubled off last year's lows.

You've heard the old "buy on the rumor, sell on the news" adage? Well, buying on the hype is the same thing. It's true that Lions Gate will make a lot of money as it milks this book trilogy into three or four movies. However, given the heady gains in recent months, it's only natural for the stock to take a breather.

2.The Nasdaq Composite will once again beat the Dow this week 
Betting on tech over stodgy blue chips has been a steady bet for me all year. Why change now? Earnings season is over, but it's clear that investors are still favoring tech over blue chips. The market is ripe for the tech-stacked secondary stocks to continue to outpace the 30 mega-caps that make up the Dow Jones Industrial Average.

3. Oxford Industries will beat Wall Street's earnings estimates
Some stocks are snappier dressers than others. Oxford Industries (NYS: OXM) is the company behind the tropical Tommy Bahama shirts and stylish Lilly Pulitzer dresses. The one thing that Oxford knows how to dress up better than its customers is its income statement. If analysts say the company earned $0.54 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.

 

EPS Estimate

EPS

Surprise

Q4 2010$0.31$0.3513%
Q1 2011$1.00$1.077%
Q2 2011$0.52$0.5710%
Q3 2011$0.14$0.1614%

Source: Thomson Reuters.

Things can change, of course. We live in times where fashions change quickly. Oxford has plenty of product lines and a few lucrative licensing deals, but an apparel company can also strike out from time to time. However, Oxford's lines seem to be in touch with what consumers want now -- and it's hard to question its momentum.

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.

At the time this article was published We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. Try any of our Foolish newsletter servicesfree for 30 days.Longtime Fool contributorRick Munarrizcalls them as he sees them. He owns no shares in any of the stocks in this story and is also part of theRule Breakersnewsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Motley Fool has adisclosure policy.

Copyright © 1995 - 2012 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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