A 20 percent gain this year for shares of Edwards Lifesciences Corp. (EW) tells a story of healthy institutional buying helping the rise. The heart-valve maker's latest earnings announcement on July 26 showed positive momentum for future revenues and EPS, which may lead to further gains for the stock.
Being a growth stock that recently reported strong earnings and issued favorable guidance, Edwards Lifesciences makes a strong case for bullish institutional investors. The recent consolidation in the stock could also be a great opportunity for investors to pick up shares. For MAP, the strongest indicator of positive price momentum is by measuring potential institutional accumulation.
Notably, since April of this year MAP has flagged six potential institutional buy signals in Edwards Lifesciences, which is a large number over such a time frame. In the chart below, EW is sitting right near its 50-day moving average, and the Relative Strength Index (RSI) shows nowhere near overbought levels since the gap higher in April.
Chart source: TradingView
MAP’s process focuses on identifying companies with healthy fundamentals accompanied by outsized unusual institutional activity to try and measure potential accumulation/distribution at the single stock level. By studying these data points we can hypothesize what equities institutions are trafficking in and marry this information with fundamentally strong companies. We want the odds on our side when looking for the highest quality stocks.
Many of the best-performing stocks over the years have exhibited continual institutional support, telling a story of where big firms may see opportunity. Edwards Lifesciences is part of the growth-led market this year and continues to be a large institutional holding.
When deciding on the strongest candidate for long-term growth, we consider many technical areas important to success with a few for Edwards Lifesciences being:
- Recent closing six-month highs achieved ($120.15 on June 23)
- Year-to-date outperformance vs. the overall market (+~10% vs. the S&P 500)
- Year-to-date outperformance vs. the sector (+~5.32% vs XLV)
- And most importantly, institutional support
On top of a great technical picture, one should also make an effort to see if the fundamental picture supports a long-term investment. The areas you want to consider important for continual institutional support are:
- Increasing one-year sales growth (+18.85% for Edwards Lifesciences)
- Increasing three-year revenue growth (+13.25%)
- Increasing profits (three-year EPS growth of +31%)
Taking a look at the overall picture of the institutional accumulation/distribution activity that we monitor for the broad market, signs continue to point to continual accumulation as quality growth equities power ahead. As healthcare stocks continue to be a leading sector, we want to be along for the ride, and Edwards Lifesciences could remain attractive to keep institutions invested. EW has been a high-ranked stock the last few months, and we believe its recent outperformance will continue going forward.
The Bottom Line
Edwards Lifesciences represents a potential buying opportunity for long-term institutional investors. Given the strong institutional accumulation signals over the last three months, its high stock ranking and its multi-year EPS growth, shares could look cheap now in the years to come.
To learn more about MAP’s institutional signals please visit our site.
Disclosure: The author holds a long position in EW at the time of publication.
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