For years, growth stocks have been beneficiaries of outsized gains compared to the averages. The main criteria we look for when betting on upside in a stock are improving fundamentals, great entry points (technicals), and a history of bullish trading activity in the shares.

The hallmark way we go about finding the best stocks – the outliers – is by looking for quiet unusual trading activity. Oftentimes, that can be institutional activity – i.e., big money. We'll go over what that big money trading activity looks like in a bit. But the five stocks we see as long-term candidates are Digital Turbine, Inc. (APPS), Etsy, Inc. (ETSY), Lululemon Athletica Inc. (LULU), Roku, Inc. (ROKU), and Shopify Inc. (SHOP).

For MAPsignals, we believe that the true tell on the near-term trajectory of a stock lies in its trading activity. The bottom line here is that the manner in which a stock trades can oftentimes alert you to the forward fundamental picture more so than simply looking at a company's financials alone. We want the odds on our side when looking for the highest-quality stocks.

Up first is Digital Turbine, Inc. (APPS), which is a leading content delivery company. The shares have been in rocket mode this year. When we decide on the strongest candidate for long-term growth, we consider many technical areas important to success. The following are a few areas in which Digital Turbine stock has caught our attention year to date (YTD):

  • YTD outperformance vs. market: +322.46% vs. SPDR S&P 500 ETF Trust (SPY
  • YTD outperformance vs. technology ETF: +300.53% vs. Technology Select Sector SPDR Fund (XLK)
  • Recent big money signals

Just to show you graphically what our big money activity signal looks like, have a look at all of the top buy signals posted by the stock. Digital Turbine has shown a strong chart over the past few years. Green bars are showing that the stock was likely being bought by an institution according to MAPsignals. It is clear there is a lot of green recently with this stock. That's exactly what you want to see when looking for a great growth name.

Chart showing the top-rated buy signals posted by Digital Turbine, Inc. (APPS)
www.mapsignals.com, end-of-day data sourced from Tiingo.com

On top of technicals, one should also look under the hood to see if the fundamental picture supports a long-term investment. As you can see, Digital Turbine's revenue growth has been strong:

  • Three-year sales growth rate: +18.04%
  • Three-year earnings growth rate: -9.34%

Next up is Etsy, Inc. (ETSY), which is an e-commerce platform. The company offers many unique products and has done well in the new stay-at-home world. When we decide on the strongest candidate for long-term growth, we consider many technical areas important to success, with a few for Etsy being:

  • YTD outperformance vs. market: +163.37% vs. SPY
  • YTD outperformance vs. consumer discretionary ETF: +151.18% vs. Consumer Discretionary Select Sector SPDR Fund (XLY)
  • Historical big money signals

Below are the top buy signals Etsy stock has made since 2018. The chart shows a strong uptrend.

Chart showing the top-rated buy signals posted by Etsy, Inc. (ETSY)
www.mapsignals.com, end-of-day data sourced from Tiingo.com

On top of a great long-term technical picture, one should also look under the hood to see if the fundamental picture supports a long-term investment. As you can see, Etsy has strong sales and earnings growth:

  • Three-year sales growth rate: +31.09%
  • Three-year earnings growth rate: +8.87%

Another growth name to consider is Lululemon Athletica Inc. (LULU), which is a leading athletic wear company. When we decide on the strongest candidate for long-term growth, we want to see a history of big money buying the shares. Those tend to be outlier stocks. A few technical areas we like for Lululemon are:

  • YTD outperformance vs. market: +32.49% vs. SPY
  • YTD outperformance vs. consumer discretionary ETF: +20.3% vs. XLY

Below are the big money signals Lululemon stock has made since 2018. This stock has been a monster performer over the years.

Chart showing the top-rated by signals posted by Lululemon Athletica Inc. (LULU)
www.mapsignals.com, end-of-day data sourced from Tiingo.com

On top of a strong technical picture, one should also look under the hood to see if the fundamental picture supports a long-term investment. Lululemon's growth rate is impressive. Just look at the past few years:

  • Three-year sales growth rate: +19.39%
  • Three-year earnings growth rate: +37.78%

Number four on the list is Roku, Inc. (ROKU), which is a leading streaming giant. When we decide on the strongest candidate for long-term growth, we consider many technical areas important to success, with a few for Roku being:

  • YTD outperformance vs. market: +32.61% vs. SPY 
  • YTD outperformance vs. technology ETF: +10.68% vs. XLK
  • Historical big money signals

Below are the big money signals that Roku stock has made since 2018.

Chart showing the top-rated buy signals posted by Roku, Inc. (ROKU)
www.mapsignals.com, end-of-day data sourced from Tiingo.com

On top of the technical picture, one should also look under the hood to see if the fundamental picture supports a long-term investment. As you can see, Roku has been growing revenues nicely. Wall Street has been rewarding the shares:

  • Three-year sales growth rate: +41.82%
  • Three-year earnings growth rate: -157.11%

Our last growth candidate is Shopify Inc. (SHOP), which is another e-commerce company. When we decide on the strongest candidate for long-term growth, we consider many technical areas important to success. A few bright spots for Shopify include:

  • YTD outperformance vs. market: +138.06% vs. SPY 
  • YTD outperformance vs. technology ETF: +116.13% vs. XLK
  • Recent big money signals

Below are the big money signals that Shopify stock has made since 2018. You can see that this stock has been an incredible growth name with tons of big money signals.

Chart showing the top-rated buy signals posted by Shopify Inc. (SHOP)
www.mapsignals.com, end-of-day data sourced from Tiingo.com

On top of the technical picture, one should also look under the hood to see if the fundamental picture supports a long-term investment. As you can see, Shopify has grown over the past few years:

  • Three-year sales growth rate: +59.79%
  • Three-year earnings growth rate: -42.08%

The Bottom Line

Shares of Digital Turbine, Etsy, Lululemon, Roku, and Shopify represent a potential buying opportunity for the long-term investor. Given the strong historical revenue and earnings growth alongside multiple big money buy signals, these stocks could be worth a spot in a growth-oriented portfolio. 

Disclosure: At the time of publication, the author holds a long position in Lululemon but no positions in Digital Turbine, Etsy, Shopify, and Roku.

Disclaimer