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 include 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 unusual trading activity looks like in a bit. But the five stocks we see as long-term growth candidates are Cintas Corporation (CTAS), Entegris, Inc. (ENTG), Floor & Decor Holdings, Inc. (FND), KLA Corporation (KLAC), and Lam Research Corporation (LRCX).

At Mapsignals, we believe that the true tell on the near-term trajectory of the 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 by 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 Cintas Corporation (CTAS), which is a leader in bulk uniform and cleaning products. The company recently released a strong earnings report. 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 Cintas stock has grabbed our attention year to date (YTD):

  • YTD outperformance vs. market: +39.05% vs. SPDR S&P 500 ETF (SPY)
  • YTD outperformance vs. industrials sector: +36.83% vs. Industrial Select Sector SPDR Fund (XLI)
  • Recent big money signals

Just to show you graphically what our unusual trading activity (big money) signals look like, have a look at all of the top buy signals posted by Cintas stock. Cintas has shown a strong chart over the past year. Green bars are showing that Cintas was likely being bought by an institution, according to Mapsignals. It is clear that there has been 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 unusual institutional (UI) signals made by Cintas Corporation (CTAS)
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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, Cintas recently reported strong year-over-year (YoY) numbers:

  • Q1 2020 YoY revenue growth rate: +6.7%
  • Q1 2020 YoY operating income growth rate: +15.4%

Next up is Entegris, Inc. (ENTG), which is a top semiconductor company. It has been growing nicely with big money buying. When we decide on the strongest candidate for long-term growth, we consider many technical areas important to success. A few postivies for Entegris include:

  • YTD outperformance vs. market: +51.39% vs. SPY 
  • YTD outperformance vs. technology sector: +40.28% vs. Technology Select Sector SPDR Fund (XLK)
  • Recent big money signals

Below are the top buy signals Entegris stock has made since 2017. Buying has clearly been strong in 2019:

Chart showing the unusual institutional (UI) signals made by Entegris, Inc. (ENTG)
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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, Entegris has solid fundamentals:

  • Three-year sales growth rate: +11.79%
  • Three-year earnings growth rate: +64.18%

Another growth name to consider is Floor & Decor Holdings, Inc. (FND), which is a leading flooring company. When we decide on the strongest candidate for long-term growth, we want to see increasing volumes as the price gains. A few technical areas we like for Floor & Decor are:

  • YTD outperformance vs. market: +77.53% vs. SPY 
  • YTD outperformance vs. discretionary sector: +75.5% vs. Consumer Discretionary Select Sector SPDR Fund (XLY)
  • Recent big money signals

Below are the big money signals Floor & Decor stock has made recently:

Chart showing the unusual institutional (UI) made by Floor & Decor Holdings, Inc. (FND)
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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. Floor & Decor's growth rate is impressive. Just look at the past few years:

  • Three-year sales growth rate: +29.76%
  • Three-year earnings growth rate: +72.13%

Number four on the list is KLA Corporation (KLAC), which is a leading semiconductor equipment firm. The shares have been in bull mode in 2019. When we decide on the strongest candidate for long-term growth, we consider many technical areas important to success, with a few for KLA being:

  • YTD outperformance vs. market: +64.03% vs. SPY
  • YTD outperformance vs. technology sector: +52.92% vs. XLK
  • Recent big money signals

Below are the big money signals that KLA stock has made over the past few years:

Chart showing the unusual institutional (UI) signals made by KLA Corporation (KLAC)
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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, KLA has been growing nicely:

  • Three-year sales growth rate: +15.19%
  • Three-year earnings growth rate: +21.49%

Our last growth candidate is Lam Research Corporation (LRCX), which is another leading semiconductor equipment maker. The company has been growing rapidly, and the shares have been on a tear. When we decide on the strongest candidate for long-term growth, we consider many technical areas important to success. The following are a few bright spots for Lam Research:

  • YTD outperformance vs. market: +59.96% vs. SPY
  • YTD outperformance vs. technology sector: +48.85% vs. XLK
  • Recent bullish big money signals

Below are the big money signals Lam Research has made over the past few years. You can see that this stock has been in a steady uptrend in 2019.

Chart showing the unusual institutional (UI) signals made by Lam Research Corporation (LRCX)
www.mapsignals.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, Lam Reserach has grown over the past few years:

  • Three-year sales growth rate: +20.48%
  • Three-year earnings growth rate: +40.11%

The Bottom Line

Shares of Cintas, Entegris, Floor & Decor, KLA, and Lam Research represent a potential buying opportunity for the long-term investor. Given the strong historical revenue and earnings growth alongside multiple big money buy signals from unusual trading, these stocks could be worth a spot in a growth-oriented portfolio. 

To learn more about Mapsignals' institutional signals please visit our "About Us" page.

Disclosure: The author holds a long positions in shares of Lam Research but no positions in Cintas, Entegris, Floor & Decor Holdings, and KLA at the time of publication.