It seemed like we were just about to enjoy moving to the next, more positive chapter of the market story when our old trusted friend General Electric (NYSE: GE, $32.05) decided to give us a "Jagged Edge" twist to our plot. We've come to expect consistency from what is arguably the bluest of the blue chips and Friday's announcement of its miss was all the market needed to plunge lower.

On one hand, it seems strange that anybody would be shocked that a company with as broad of exposure to the overall economy as GE would be suffering, particularly given it's significant finance business and the numbers we're seeing across the board from firms involved in credit. On the other hand, Jeff Immelt had told investors, as late as on March 13th, that 2008 earnings were "in the bag." Not surprisingly, while the Dow was off 2% on Friday, GE was down 13% while trading 321 million shares. Looking for the silver lining, while the market was off significantly, volume was down despite this action and if you ex'd out the 321 million shares GE traded, it was a very quiet day indeed - not panic as one could have assumed by the losses.

For the week, stocks dropped with the NASDAQ down 3.4%, the S&P 500 down 2.7% and the Dow of 2.2%. Interestingly, volume has been low, with the last 15 sessions below the 50-day moving average.

Earnings season is going to cause some activity but with EPS expected down 13% for the first quarter, I believe bad results are already anticipated and were baked into share prices in January, February and March.

One of the four Ps we think is of particular importance in the environment that we are in is the fourth P - Predictability. We are optimistic on the market but in order to take a big, hard swing at stocks that have attractive prices and that we believe are poised to go up, we need to have confidence in the near-term fundamentals - that is a key. We know, in the long-run, earnings growth drives stock prices but to enjoy the long-term, we need to survive the short-term.

One of the biggest challenges for a young, fast-growing company is delivering operating results that are predictable.

Investors reward management teams that under promise and over deliver and punish companies that habitually miss expectations - often to extremes that seem illogical on the surface. Apollo (NASDAQ: APOL, $46.76), one of the top performing stock from 1994-2008, promised Wall Street 25% earnings growth, delivered 34% earnings growth, and its stock had a CAGR of 38%.

Early in my analyst career, I followed Discovery Zone, a rapidly growing provider of indoor entertainment centers for children. The company had a management team led by Don Flynn, a former senior executive of the famously successful Waste Management Corporation (NYSE: WMI, $33.80).

Discovery Zone was the leader in a new market and its Discovery Zone centers were wildly popular with parents and children as a way to entertain kids on a rainy afternoon, for a birthday party, or just to take a break. The potential seemed huge, as one could imagine putting a Discovery Zone in every community in America and, at some point, in the entire world! This was going to be a mini-Disneyland with a better return on investment.

The fly in the ointment was predictability. The first sign of smoke was when the company reported a record quarter with earnings growth up nearly 100%. Why was that a problem? Because investor's expectations were slightly higher - they were supposed to deliver exactly 100% earnings growth, and they missed EPS estimates by a penny.

The next morning, Discovery Zone shares were down 50%, and I was having a conversation with a very successful growth investor who sold all of his shares that day. I said, "This is ridiculous. The company still is growing like crazy, almost 100%, and they only missed their earnings by $0.01! The potential is still huge! And this management team is world class." I'll never forget his response: "Mike, if these guys can't find a penny, they are too dumb for me to invest with or their business has other issues."

He was right about at least one of these predictions. Parents would have one birthday party there, but they wouldn't have two. Been there, done that. Kids were getting sick of interacting with a zillion other kids swimming in a sea of plastic, contagious balls. Competitors were knocking them off with mega-corporations like McDonalds (NYSE: MCD, $55.40) copying them and providing a "fun center" as a way to entice parents to buy more happy meals. Discovery Zone was bankrupt within twelve months.

Not great research on my part, no question, but it's hard. How do you distinguish between a fad and a trend? Is it Starbucks (NASDAQ: SBUX, $17.26) or Krispy Kreme (NYSE: KKD, $3.05)? Amazon.com (NASDAQ: AMZN, $71.99) or eToys? The Cheesecake Factory (NASDAQ: CAKE, $21.20) or Boston Chicken? Whole Foods (NASDAQ: WFMI, $32.04) or Webvan? Disney (NYSE: DIS, $30.18) or Discovery Zone?

Predictability is somewhat of a relative term. Some industries and business models are much more predictable than others. An outsourced service provider that has ten year, non-cancelable contracts is much more predictable than a movie production company or a software company that gets 50% of its sales on the last week of the quarter.

The key to determining a company's predictability and its ability to perform against expectations is partially business model, but also partially a function of the first three Ps - People, Product, and Potential.

Great managements set expectations that are achievable and are fanatical about achieving results. Dell computer (NASDAQ: DELL, $18.50) doesn't have the most predictable business model, but the management at Dell is obsessive about delivering against their promises. They are systematic about how they run their business. Winners execute.

Having a product that is exceptional is essential to predictability. The software business is notoriously unpredictable, but if you need an operating system, you buy Microsoft (NASDAQ: MSFT, $28.28), if you need a database, you buy Oracle (NASDAQ: ORCL, $19.84). There is not really a cheaper option because each has a de facto monopoly.

Even looking at a business like Starbucks which on the surface, one could say is subject to all the uncertainties of a traditional restaurant like weather, low switching cost, and consumer fickleness, is actually quite predictable. The average Starbucks customer goes to Starbucks 20 times a month! For $3.00, a CEO or a secretary can have a world class cup of coffee (or alternate drink) and have an affordable luxury. Most people I know are really unhappy if they don't get their daily Starbucks experience.

We love businesses that are addictive but don't cause cancer!

Push email services are addictive. Research In Motion's Blackberry (NASDAQ: RIMM, $115.85) devices have become so addictive they have been called "crackberries."

Potential is critical for predictability because if a company's market isn't growing, its growth is hostage to variables that impact visibility. Even if a company is the leader, and taking market share, if the pie is getting smaller, it's challenging to have predictable growth. The institutional brokerage industry, which I'm in, is going through radical structural changes that are decreasing the overall size of the market. Even though our market share has increased significantly and is still growing, it's challenging to have visibility to that growth as the market continues to shrink.

Recurring revenues is the holy grail of predictable, visible growth. Think adviser and friend David Bellet calls this type of companies "kerchunkers." Business Services outsourcing companies, drug companies where you have a patient that needs a drug to be healthy, education companies like Apollo Group that have students in their programs for two to four years are all great examples of companies with recurring revenues. Recurring revenue businesses almost always have big premiums to their multiples because of their visibility.

One of the biggest positives about On Demand software companies like salesforce.com (NYSE: CRM, 61.09) is that they are selling software as a service; unlike the license model, on demand companies charge on a per-user, per-month basis. While their up front revenue is less, the perpetual nature of the revenue stream is more predictable and the value to the customer is compelling.

It's critical that an investor creates a predictability framework that's appropriate for a specific industry.

For example, there are terrific earnings growth opportunities in the biotech sector where a company won't have revenues for a number of years - but because of the People, the Product, and the Potential, it could be a compelling investment.

In pre-revenue companies, the first three Ps take precedence, but key milestones a company can perform against give investors evidence that it's on track to capture the opportunity. With biotech companies, this could be results and timeliness from Phase I, II and III results with the FDA, a joint venture partnership with a nanotechnology company, patent approval, or commercial development milestones.

The following table includes some of ThinkPanmure's subscription-based model companies.