A gain of 46.25% year to date (YTD) for shares of SolarEdge Technologies, Inc. (SEDG) has been due in part to institutional accumulation. SolarEdge has been one of the best performing stocks over the past year, and looking at how the shares have been trading (with the share price increasing as volume increases), it should come as no surprise. With solar power usage growing year after year, SolarEdge is in a prime position to benefit from much of that growth. Not only that, one of the biggest factors used to identify strong stocks for the long term is to look simply at supply and demand – and SolarEdge stock has no doubt been in demand. Betting on growing stocks with great fundamentals and increasing institutional activity can be worthwhile for long-term shareholders.
In the perspective of research firm Macro Analytics for Professionals (MAP), the strongest indicator of positive price momentum is obtained by measuring potential institutional accumulation. In 2017, SolarEdge logged 30 of these rare signals. Since the first bullish signal in 2017 (Feb. 14), the stock has returned more than 285%. Additionally, in 2018, SolarEdge has seen six additional bullish signals. We want to see bullish activity in the stock's shares alongside solid fundamentals. This indicates that demand for the stock should increase.
In the chart below, SolarEdge price gains are accompanied by increasing accumulation. There is no resistance above the level of approximately $57, and the stock has room to run to the upside:
MAP's process focuses on identifying companies with healthy fundamentals accompanied by outsized, unusual institutional activity to try and measure potential accumulation/distribution at the single-stock level. By studying these data points, we can hypothesize which equities institutions are trafficking in and marry this information with fundamentally sound companies. We want the odds on our side when looking for the highest-quality stocks.
When deciding on the strongest candidate for long-term growth, we consider many technical areas important to success. A few of these for SolarEdge are as follows:
On top of a great technical picture, one should also look under the hood to see if the fundamental picture supports a long-term investment. As you can see, SolarEdge has solid earnings and sales growth rates:
- One-year sales growth rate: +26.47%
- One-year EPS growth rate: +12%
- Three-year EPS growth rate: +194.56%
SolarEdge checks the box on strong technicals and fundamentals while recently showing bullish institutional momentum. We believe that the company's recent earnings report on May 9, 2018, supports the fundamental narrative for a potential long-term position. SolarEdge shares have been in high-growth mode for the past year, and with multiple unusual institutional activity signals, it could be setting up for a move to the upside. All of this points to further long-term bullish action for the stock.
The Bottom Line
SolarEdge stock represents a potential buying opportunity for the long-term investor. Given the recent breakout to new highs, the solid earnings beat and guidance, and multiple recent bullish institutional accumulation signals, this stock could be worth a spot in a growth portfolio.
To learn more about MAP's institutional signals please visit our "About Us" page.
Disclosure: The author holds no position in SolarEdge shares at the time of publication.