A gain of approximately 186% in 2018 for shares of The Trade Desk, Inc. (TTD) likely was supported by strong institutional buying accompanying the move. The Trade Desk released earnings on Aug. 9, with blowout numbers that the Street liked. The company is firing on all cylinders in terms of digital ad spend. Even with terrific fundamentals, the true tell on the near-term trajectory lies in the trading activity of the stock. At many points in 2018, The Trade Desk shares have increased in price alongside an increase in volume. This can be indicative of smart money accumulating 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 by simply looking at a company's financials alone.
According to Macro Analytics for Professionals (MAP), the strongest indicator of positive price momentum is obtained by measuring potential institutional accumulation, and in 2018, The Trade Desk stock has logged 10 of these rare signals. We like to see bullish activity in the shares alongside solid forward fundamentals. This indicates that demand for the stock should increase over time.
In the chart below, The Trade Desk stock broke out to new 52-week highs on big volumes. Shares should continue the upward trajectory:
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 The Trade Desk are as follows:
- YTD outperformance vs. market: +180.05% vs. SPDR S&P 500 ETF (SPY)
- YTD outperformance vs. sector: +172.48% vs. Technology Select Sector SPDR ETF (XLK)
- Bullish potential accumulation signals
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, The Trade Desk has solid sales growth rates:
- One-year sales growth rate: +54%
- Three-year sales growth rate: +95%
The Trade Desk checks the box on strong technicals and fundamentals, while showing bullish institutional momentum in 2018. We believe that the current level for the shares is in position for further upside. All of this points to further long-term bullish action for the stock.
The Bottom Line
The Trade Desk stock represents a potential buying opportunity for the long-term investor. Given the solid earnings growth and multiple unusual accumulation signals, this stock could be worth a spot in a growth-oriented portfolio.
To learn more about MAP's institutional signals, please visit our "About Us" page.
Disclosure: The author holds no position in The Trade Desk shares at the time of publication.