A gain of 48.99% in 2019 for shares of Edwards Lifesciences Corporation (EW) tells a story of big buy demand for the shares. This buying is very unusual and has been happening very recently. Over time, a great way to uncover tomorrow's winners is to look for great stocks seeing big buy activity, and Edwards Lifesciences could be just the opportunity. You've likely heard that the trend is your friend. The trend I'm focused on is the trend in big money activity.
Smart money managers are always looking to bet on the next outlier stocks … the best in class. For Mapsignals, it's not enough to look at technicals and fundamentals alone. The key lies in the demand for shares … the big money.
I'll go into the fundamental picture later, but the true tell on the near-term trajectory of a stock lies in its trading activity. Simply put, it's all about supply and demand. When demand is higher than supply, the stock rises. When demand is lower than supply, stocks fall. For 2019, Edwards Lifesciences shares have continuously been helped by outsized trading activity. Another positive for the stock is the recent breakout in other health care stocks. Betting on a leader in a group is a good long-term recipe.
For Mapsignals, when we look for an entry on a leading stock, we look for big money signals. Just to show you what our big money activity signals look like, have a look at all of the big money (unusual institutional) signals Edwards Lifesciences stock has made over the past year. Focusing on 2019, you can see a lot of buy signals (green) that line up with higher stock prices soon after. After last week's earnings report, we think more upside is near:
Since June, Edwards Lifesciences has logged six big money buy signals, indicative of buying in the shares (see chart above). This shows that traders are likely thinking that the shares are poised to head higher. These data points suggest that big money appetite for the stock is high.
If you are going to make a bet on the direction of a stock, it's prudent to pay attention to how the shares are trading. Based on history, the odds suggest that this stock is poised for gains. The big money is always looking for an opportunity to buy companies growing fast. It's all about playing the odds by not fighting the trend.
Mapsignals' goal is to identify tomorrow's top stocks today. We're basically looking for outlier companies with healthy fundamentals accompanied by big money signals (outsized institutional activity). We are looking for the big money bets because big money moves stocks. By studying these data points, we can make an educated guess as to which stocks institutions are trafficking in and marry this information with fundamentally sound companies. We want the odds on our side when looking for the highest-quality stocks.
When we decide on a long candidate, we consider leaders that have a history of technical outperformance. When they show leadership, we see these as opportunities. The following are a few areas in which Edwards Lifesciences stock has grab our attention year to date (YTD):
- YTD outperformance vs. market: +26.63% vs. SPDR S&P 500 ETF (SPY)
- YTD outperformance vs. health care sector: +41.28% vs. Health Care Select Sector SPDR Fund (XLV)
- Recent big money buy signals
Now, we take it a step further and score the best stocks showing big money trading activity. Below you can see that Edwards Lifesciences has a rich history of buy signals for Mapsignals. The main takeaway is how the stock is very consistent with demand. We think a new round of buy signals could be upon us soon:
On top of a long-term technical picture that is strong, one should also look under the hood to see if the fundamental picture supports a long-term investment. As you can see, Edwards' numbers are very strong:
- Three-year revenue growth rate: +14.38%
- Three-year earnings growth rate: +14.79%
Edwards Lifesciences shares are breaking out as the market is making new highs. The company is quietly gaining with demand for its shares. We like the long-term story of the stock.
The narrative for Edwards Lifesciences and other high-quality health care stocks is big growth and earnings ahead. We are always on the lookout for great companies pressing higher year after year. The best companies in a group tend to outperform over the long run. Health care stocks have been relatively weak all year until recently. All of this points to a long-term opportunity for this stock.
The Bottom Line
Edwards Lifesciences stock is breaking out with strong buying pressure. Our big money indicator is signaling that we should take notice. Shares could be positioned for more upside. Given the historical growth in share price and growing fundamentals, this stock could be worth a spot in a growth-oriented portfolio.
Disclosure: The author holds a long position in Edwards Lifesciences shares at the time of publication.