A more than 44 percent gain this year for shares of Illumina Inc. (ILMN) shows healthy institutional buying accompanying their climb. Residing in a powerful group of outperforming Life Sciences equities, the stock for the genome sequencing device maker continues to be a leader in its sector.

Betting on top stocks with great fundamentals and technicals—accompanied by strong institutional activity—can be a great recipe for bullish investors, and Illumina's recent 52-week closing high of $199.58 on Aug. 7 may signal further upside to come. For MAP, the strongest indicator of positive price momentum is by measuring potential institutional accumulation.

Notably, year-to-date we have flagged 11 potential institutional buy signals in Illumina, which is important when looking for long-term winning candidates. As the chart below shows, shares recently made 52-week closing highs, have pulled back to support and are accompanied by strong accumulation.

Chart source: TradingView   

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.

Many of the best performing stocks over the years have exhibited continual institutional support, telling a story of where big firms may see opportunity. A company, like Illumina, which resides in a strong sector, is quickly growing its revenues, and growing its earnings may keep institutions holding on to it for years to come.

When deciding on the strongest candidate for long-term growth, we consider many technical areas important to success with a few for Illumina being:

  • Recent 52-week closing highs achieved ($199.58 on Aug. 7)
  • Year-to-date outperformance vs. the overall market (+~35.63% vs. the S&P 500)
  • Year-to-date outperformance vs. the sector (+~31.84% vs. XLV)
  • And most importantly, institutional support

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. The areas you want to consider important for continual institutional support are:

  • Increasing one-year EPS growth rate (+21% for Illumina)
  • Increasing three-year sales growth rate (+19.4%)
  • Increasing three-year EPS growth rate (+64%)

Illumina checks the boxes on great technicals and fundamentals, while holding a high rankings in MAP’s scoring process, which may point to further price momentum.

Taking a look at the overall picture of the institutional accumulation/distribution activity that we monitor for the broad market, signs recently show a modest slowing of accumulation as distribution has picked up. With the potential for a further pullback by the market, we want to bet alongside stocks in leadership position. We feel Illumina has great technical and fundamental setup for stock appreciation in the years to come and could remain attractive to keep institutional investors invested. Shares have been gaining since January with a great forward technical picture, and we believe the stock has plenty more room to the upside in the coming years.

The Bottom Line

Illumina represents a potential buying opportunity for long-term institutional investors. Given the strong accumulation signals year to date, its high stock ranking and its leadership position in a strong sector, this company may continue to reward holders.

To learn more about MAP’s institutional signals please visit our site

Disclosure: The author holds a long position in ILMN at the time of publication.

Please see our Investment Research Disclaimer.

 

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