A year-to-date (YTD) gain of approximately 36% for shares of Micron Technology, Inc. (MU) was likely due in part to institutions buying the shares. In fact, the company's institutional ownership rate sits at 85% and will likely remain strong as the semiconductor space is on fire lately. Micron is one of the leaders in the sector, as the stock is outperforming the VanEck Vectors Semiconductor ETF (SMH) by 23.3% in 2018.

One of the biggest factors used to identify strong stocks for the long term is to look simply at supply and demand – and shares of Micron have been in demand. Large institutional players have been in accumulation mode as the company is projected to outperform expectations. Betting on leading stocks with great fundamentals and increasing institutional activity can be a smart strategy for long-term shareholders.

Being that Micron has strong momentum this year and given the semiconductor space is seeing a lot of M&A activity – Broadcom Limited (AVGO) for Qualcomm Incorporated (QCOM), Qualcomm for NXP Semiconductors N.V. (NXPI) and recent rumors of Intel Corporation (INTC) for Broadcom – institutions are likely to stay invested. This makes a very compelling case for long-term bullish investors.

In the perspective of Macro Analytics for Professionals (MAP), the strongest indicator of positive price momentum is obtained by measuring potential institutional accumulation, and in 2018, Micron stock has logged nine of these rare signals. The first accumulation signal for Micron this year occurred on Feb. 26. This indicates that demand for the shares is strong. In the chart below, Micron stock hit a new 52-week high accompanied by large volume and increasing institutional accumulation. This is a very strong breakout:


Courtesy of 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.

When deciding on the strongest candidate for long-term growth, we consider many technical areas important to success. A few of these considerations for Micron are as follows:

  • YTD outperformance vs. overall market: +32.32% vs. SPDR S&P 500 ETF (SPY)
  • YTD outperformance vs. sector: +26.70% vs. Technology Select Sector SPDR ETF (XLK)
  • Unusual institutional activity: 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, Micron is growing rapidly:

  • Institutional ownership: 84.5%
  • One-year sales growth rate: +63.9%
  • Three-year sales growth rate: +13%

Micron checks the box on strong technicals and fundamentals while continuing to gain institutional momentum. We believe that Micron has the growth and institutional accumulation that are attractive for those looking for stock appreciation in a sizzling sector. Micron stock has been gaining rapidly year to date with heavy counts of accumulation signals accompanying the move. All of this points to further bullish action for the stock.

The Bottom Line

Micron stock represents a potential buying opportunity for the long-term investor. Given the continuous potential institutional accumulation signals, this stock could be worthy of 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 Micron stock at the time of publication.

Investment Research Disclaimer

Want to learn how to invest?

Get a free 10 week email series that will teach you how to start investing.

Delivered twice a week, straight to your inbox.