3 Predictions for the New Week

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

  • I predicted that Tesla Motors would move higher on the week. It had closed sharply lower for five consecutive weeks, and it seemed a correction was ripe. The electric-car maker is still overvalued by most measuring sticks, but there's something to be said about the appeal of its Model S all-electric sedan. The stock surged 4.9% on the week. I was right.
  • I predicted that the tech-heavy Nasdaq would outperform the Dow Jones Industrial Average. . This has been a tricky call lately, so how did it play out this time? Well, this was a holiday-shortened trading week for stocks. The Nasdaq moved 1.7% higher, blowing past the Dow and its mere 0.1% gain. I was right.
  • My final call was for Renren to beat Wall Street's income estimates in its latest quarter. The leading Chinese social-networking website operator is experiencing a lull in online advertising, but it was finding other ways to post narrower losses than Wall Street was projecting. I was banking on a repeat performance. Renren offered up brutally disappointing guidance, but its adjusted loss of $0.07 a share was better than the $0.11 analysts were forecasting. I was right.

Three out of three? Awesome!

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. Five Below will move higher on the week
Five Below  reports quarterly results this week, and it should be another strong report. Analysts see the "cheap chic" retailer that sells goods for $5 or less growing revenue by 29%, with profitability climbing even faster.

These may seem like lofty expectations -- especially with the stock near all-time highs -- but Five Below has easily beaten analyst expectations. There have been plenty of retailers slipping this earnings season, but they lacked the momentum Five Below had going in.

My first call is for Five Below's stock to move higher this 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, even if it's been a bad bet a few times lately. This is the time for Nasdaq's growth stocks to shine. 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. Ambarella will beat Wall Street's earnings estimates
Some stocks are just flat-out better than others.

Ambarella is a provider of video-processing chips found in high-def cameras. If you own a GoPro wearable camera or a Dropcam surveillance system, you probably own some of Ambarella's handiwork.

Another thing it does is make analysts look like perpetual underachievers. If analysts say the company posted a profit of $0.29 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.


EPS Estimate



Q3 2013




Q4 2013




Q1 2014




Q2 2014




Source: Thomson Reuters.

Things can change, of course. Gadgetry trends can shift. Providing components to third-party products can result in cutthroat competition. Analysts also see Ambarella earning less than it a did a year ago, and that can always be a cause for concern.

However, it's hard to argue against the trend. Everything seems to be falling into place for another market-thumping quarter on the bottom line.

One more prediction for the year ahead
Well, there are three predictions right there. Let's see how I fare this week. Looking at the longer term, investors shouldn't forget that the market stormed out to huge gains across 2013, and those who remained on the sidelines got burned. However, opportunistic investors can still find huge winners. The Motley Fool's chief investment officer has just hand-picked one such opportunity in our new report: "The Motley Fool's Top Stock for 2014." To find out which stock it is and read our in-depth report, simply click here. It's free!

The article 3 Predictions for the New Week originally appeared on Fool.com.

Longtime Fool contributor Rick Munarriz owns shares of Ambarella. The Motley Fool recommends Ambarella and Tesla Motors and owns shares of Tesla Motors. 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.

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