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 unusual trading activity. Oftentimes, that can be institutional activity … i.e. smart money. We'll go over what that unusual trading activity looks like in a bit. But the five stocks we see as long-term candidates are Chipotle Mexican Grill, Inc. (CMG), Facebook, Inc. (FB), Illumina, Inc. (ILMN), PayPal Holdings, Inc. (PYPL), and Visa Inc. (V).

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 Chipotle Mexican Grill, Inc. (CMG), which is a leader in fast casual Mexican dining and a fast-growing restaurant chain. When we decide on the strongest candidate for long-term growth, we consider many technical areas important to success. A few of these for Chipotle Mexican Grill include:

  • Year-to-date (YTD) outperformance vs. market: +49.12% vs. SPDR S&P 500 ETF (SPY
  • YTD outperformance vs. discretionary sector: +46.81% vs. Consumer Discretionary Select Sector SPDR Fund (XLY)
  • Recent bullish unusual trading signals

Just to show you graphically what our unusual trading activity signals look like, have a look at all of the unusual institutional (UI) alerts made by the stock. Chipotle has shown a strong chart over the past decade. Green bars are showing UI buys, and it is clear that there is a lot of green going on 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 Chipotle Mexican Grill, Inc. (CMG)
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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, Chipotle has a solid fundamental history:

  • Q1 2019 year-over-year (YoY) revenue growth rate: +13.9%
  • Q1 2019 YoY adj. diluted earnings growth rate: +59.6%

Next up is Facebook, Inc. (FB), which is a top social network. It is known for having over 1 billion users on its platforms: Facebook, Instagram, and WhatsApp. When we decide on the strongest candidate for long-term growth, we consider many technical areas important to success. Facebook stock stands out owing to the following factors:

  • YTD outperformance vs. market: +28.34% vs. SPY
  • YTD outperformance vs. technology sector: +19.8% vs. Technology Select Sector SPDR Fund (XLK)
  • Recent bullish unusual trading signals

Below are the UI signals Facebook stock has made over the past year. Clearly, buying has been showing up recently.

Chart showing the unusual institutional signals made by Facebook, Inc. (FB)
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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, Facebook has solid fundamentals:

  • Q1 2019 YoY revenue growth rate: +26%
  • Q1 2019 YoY diluted EPS growth rate: -50% (includes $3 billion legal expense related to the FTC)

Another growth name to consider is Illumina, Inc. (ILMN), which is a leading genome and DNA sequencing firm. When we decide on the strongest candidate for long-term growth, we want to see increasing volumes as the price gains. A few areas we like for Illumina are:

  • YTD outperformance vs. market: +0.69% vs. SPY
  • YTD outperformance vs. health care sector: +10.63 vs. Health Care Select Sector SPDR Fund (XLV)
  • Historical bullish unusual trading signals

Below are the UI signals Illumina stock has made over the past year:

Chart showing the unusual institutional signals made by Illumina, Inc. (ILMN)
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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. Illumina's growth rate is impressive. Just look at the recent figures:

  • Q1 2019 YoY revenue growth rate: +8%
  • Q1 2019 YoY GAAP net income growth rate: +11%

Number four on the list is PayPal Holdings, Inc. (PYPL), which is a leading e-commerce payment company that is well known not only for payments made via PayPal but also Venmo. When we decide on the strongest candidate for long-term growth, we consider many technical areas important to success, with a few for PayPal being:

  • YTD outperformance vs. market: +19.96% vs. SPY
  • YTD outperformance vs. technology sector: +11.10% vs. XLK
  • Recent bullish unusual trading signals

Below are the UI signals PayPal stock has made over the past year:

Chart showing the unusual institutional signals made by PayPal Holdings, Inc. (PYPL)
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, PayPal has been growing nicely:

  • Q1 2019 YoY revenue growth rate: +12%
  • Q1 2019 YoY GAAP EPS growth rate: +34%

Our last growth candidate is Visa Inc. (V), which is another great payments firm that is known for being one of the largest credit card providers globally. Visa has been a growth monster over the years. When we decide on the strongest candidate for long-term growth, we consider many technical areas important to success. A few bright spots for Visa include:

  • YTD outperformance vs. market: +13.61% vs. SPY
  • YTD outperformance vs. financials sector: +17.22% vs. Financial Select Sector SPDR Fund (XLF)
  • Recent bullish unusual trading signals

Below are the UI signals Visa stock has made over the past year. You can see that this stock has been in a steady uptrend since January.

Chart showing the unusual institutional signals made by Visa Inc. (V)
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, Visa is still in growth mode:

  • Q2 2019 YoY net revenue growth rate: +8%
  • Q2 2019 YoY net income per share growth rate: +17%

The Bottom Line

Chipotle, Facebook, Illumina, PayPal, and Visa shares represent a potential buying opportunity for the long-term investor. Given the strong historical revenue and earnings growth alongside multiple top-rated 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 position in Chipotle, Illumina, PayPal, and Visa shares but no position in Facebook at the time of publication.