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 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 growth candidates for May 2019 are Align Technology, Inc. (ALGN), salesforce.com, inc. (CRM), Facebook, Inc. (FB), Microsoft Corporation (MSFT) and Xilinx, Inc. (XLNX).

At Mapsignals, we believe that the true tell on the near-term trajectory of a stock lies in the trading activity of the shares. 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 Align Technology, Inc. (ALGN), which is a leader in invisible braces. The company has an outstanding software presence in the orthodontic space. When we decide on the strongest candidate for long-term growth, we consider many technical areas important to success. The following are a few of the areas in which Align Technology stock has impressed us year to date (YTD):

  • YTD outperformance vs. market: +33.91% vs. SPDR S&P 500 ETF (SPY)
  • YTD outperformance vs. sector: +48.56% vs. Health Care Select Sector SPDR Fund (XLV)
  • 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 Align Technology stock has shown over the past few years. Green bars are showing UI buys. It is clear 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 Align Technology, Inc. (ALGN)
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On top of the technicals, one should also look under the hood to see if the fundamental picture supports a long-term investment. As you can see, Align Technology has a solid fundamental history and has shown year-over-year (YoY) growth:

  • Q1 2019 YoY revenue growth rate: +25.6 %
  • Q1 2019 YoY Invisalign case shipments growth rate: +28.3%

Next up is salesforce.com, inc. (CRM), which is a top cloud provider. The company is known for being one of the premier leaders in cloud software. When we decide on the strongest candidate for long-term growth, we consider many technical areas important to success, with a few for salesforce.com being:

  • One-year outperformance vs. market: +24.08% vs. SPY
  • One-year outperformance vs. sector: +15.39% vs. Technology Select Sector SPDR Fund (XLK)
  • Recent bullish unusual trading signals

The following are the UI signals that salesforce.com stock has made over the past year:

Chart showing the unusual institutional (UI) signals made by salesforce.com, inc. (CRM)
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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, salesforce.com has solid fundamentals:

Another growth name to consider is Facebook, Inc. (FB), which is a global social media leader. Some of the company's popular platforms are Facebook.com, Instagram and WhatsApp. When we decide on the strongest candidate for long-term growth, we want to see increasing volumes as the price gains. A few other factors that make us positive on Facebook stock include:

  • YTD outperformance vs. market: +28.16% vs. SPY
  • YTD outperformance vs. sector: +18.92 vs. XLK
  • Historical bullish unusual trading signals

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

Chart showing the unusual institutional (UI) signals made by Facebook, Inc. (FB)
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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. Facebook's growth rate has been slowing, but the company still posted growth last year:

  • Q1 2019 YoY revenue growth rate: +26%
  • Q1 2019 YoY daily active user growth rate: +8%

Number four on the list is Microsoft Corporation (MSFT), which is a leading software company. The tech behemoth is well known for not only software but also for its growing cloud product Azure. When we decide on the strongest candidate for long-term growth, we consider many technical areas important to success. A few of these areas for Microsoft stock are:

  • YTD outperformance vs. market: +10.51% vs. SPY
  • YTD outperformance vs. sector: +1.27% vs. XLK
  • Recent bullish unusual trading signals

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

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

  • Q3 2019 YoY revenue growth rate: +14%
  • Q3 2019 YoY operating income growth rate: +25%

Our last growth candidate is Xilinx, Inc. (XLNX), which is a leading semiconductor company. It is also known as a major 5G player. When we decide on the strongest candidate for long-term growth, we consider many technical areas important to success with. The bright spots for Xilinx include:

  • YTD outperformance vs. market: +22.17% vs. SPY
  • YTD outperformance vs. sector: +12.93% vs. XLK
  • Recent bullish unusual trading signals

Below are the UI signals Xilinx stock has made over the past year. You can see that this stock has been in a steady uptrend and has recently pulled back after earnings.

Chart showing the unusual institutional (UI) signals made by Xilinx, Inc. (XLNX)
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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, Xilinx is showing growth:

  • Q4 2019 YoY revenue growth rate: +30%
  • Q4 2019 YoY net income growth rate: +68%

The Bottom Line

Shares of Align Technology, salesforce.com, Facebook, Microsoft and Xilinx 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 positions in salesforce.com and Microsoft at the time of publication. He holds no positions in Align Technology, Facebook and Xilinx.