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 growth candidates are Chipotle Mexican Grill, Inc. (CMG), Ciena Corporation (CIEN), PagSeguro Digital Ltd. (PAGS), Starbucks Corporation (SBUX), and The Trade Desk, Inc. (TTD).

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. The following are a few areas in which Chipotle stock has grabbed our attention year to date (YTD):

  • YTD outperformance vs. market: +58.65% vs. SPDR S&P 500 ETF (SPY
  • YTD outperformance vs. discretionary sector: +54.97% vs. Consumer Discretionary Select Sector SPDR Fund (XLY)
  • YTD bullish unusual trading signals

Just to show you graphically what our unusual trading activity signals look like, have a look at all of the potential unusual institutional (UI) buy signal alerts in the chart below. Chipotle has shown a strong chart over the past year. Green bars indicate that Chipotle stock saw one of the highest-rated buy signals for Mapsignals. 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)
www.mapsignals.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, Chipotle has a solid fundamental history with significant year-over-year (YoY) growth:

  • Q2 2019 YoY revenue growth rate: +13.2%
  • Q2 2019 YoY diluted earnings growth rate: +91.7%

Next up is Ciena Corporation (CIEN), which is a top networking company that has been growing nicely with bullish unusual trading activity. When we decide on the strongest candidate for long-term growth, we consider many technical areas important to success, with a few for Ciena being:

  • YTD outperformance vs. market: +13.52% vs. SPY
  • YTD outperformance vs. technology sector: +1.33% vs. Technology Select Sector SPDR Fund (XLK)
  • Recent bullish unusual trading signals

Below are the top-rated buy signals Ciena stock has made over the past year. Clearly, buying has been strong in 2019:

Chart showing the unusual institutional (UI) signals made by Ciena Corporation (CIEN)
www.mapsignals.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, Ciena has solid fundamentals:

  • Q2 2019 YoY revenue growth rate: +18.5%
  • Q2 2019 YoY diluted net income growth rate: +266%

Another growth name to consider is PagSeguro Digital Ltd. (PAGS), which is a leading Brazilian payments company. When we decide on the strongest candidate for long-term growth, we want to see increasing volumes as the share price gains. A few areas we like for PagSeguro stock are:

  • YTD outperformance vs. market: +136.02% vs. SPY
  • YTD outperformance vs. Financials sector: +136.31 vs. Financial Select Sector SPDR Fund (XLF)
  • Recent top-rated buy signals

The following are the top-rated unusual buy signals PagSeguro stock has made over the past year:

Chart showing the unusual institutional (UI) buy signals made by PagSeguro Digital Ltd. (PAGS)
www.mapsignals.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. PagSeguro's growth rate is impressive. Just look at the recent figures:

  • Q1 2019 YoY total payment volume growth rate: +69.8%
  • Q1 2019 YoY net income growth rate: +108.6%

Number four on the list is Starbucks Corporation (SBUX), which is a leading retail coffee chain. 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. A few positive factors for Starbucks include:

  • YTD outperformance vs. market: +33.46% vs. SPY
  • YTD outperformance vs. discretionary sector: +29.78% vs. XLY
  • Recent unusual buy signals

Below are the top-rated signals that Starbucks stock has made over the past year:

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

  • Q3 2019 YoY consolidated net revenue growth rate : +8%
  • Q3 2019 YoY non-GAAP EPS growth rate: +26%

Our last growth candidate is The Trade Desk, Inc. (TTD), which is a leader in digital marketing. 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. Here are some bright spots for The Trade Desk:

  • YTD outperformance vs. market: +118.05% vs. SPY
  • YTD outperformance vs. discretionary sector: +114.37% vs. XLY
  • Recent bullish unusual trading signals

Below are the top-rated buy signals The Trade Desk stock has made over the past year. You can see that this stock has been in a steady uptrend since 2018.

Chart showing the unusual institutional (UI) buy signals made by The Trade Desk, Inc. (TTD)
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, The Trade Desk is still in growth mode:

  • Q1 2019 YoY revenue growth rate: +41%
  • Q1 2019 YoY non-GAAP diluted EPS growth rate: +44%

The Bottom Line

Shares of Chipotle, Ciena, PagSeguro, Starbucks, and The Trade Desk represent a potential buying opportunity for the long-term investor. Given the strong historical revenue and earnings growth, and 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 long positions in Chipotle and Starbucks shares but no position in Ciena, PagSeguro, or The Trade Desk at the time of publication.