Best Growth Stocks for January 2021

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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 are 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 quiet unusual trading activity. Oftentimes, that can be institutional activity … i.e., big money.

We’ll go over what that big money trading activity looks like in a bit. But the five stocks we see as long-term growth candidates are Axon Enterprise, Inc. (AAXN), Align Technology, Inc. (ALGN), CyberArk Software Ltd. (CYBR), GrowGeneration Corp. (GRWG), and Mitek Systems, Inc. (MITK).

For MAPsignals, we believe that the true tell on the near-term trajectory of the 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 Axon Enterprise, Inc. (AAXN), which is a leading law enforcement technology company that has been marching higher in 2020. When we decide on the strongest candidate for long-term growth, we consider many technical areas important to success. The following are a few in which Axon stock has caught our attention year to date (YTD):

  • YTD outperformance vs. market: +61.6% vs. SPDR S&P 500 ETF Trust (SPY
  • YTD outperformance vs. industrial ETF: +68.16% vs. Industrial Select Sector SPDR Fund (XLI)
  • Recent big money signals

Just to show you graphically what our big money activity signals look like, have a look at all of the top buy signals posted by the stock. Axon has shown a strong chart over the past few years. Green bars are showing that Axon stock was likely being bought by an institution, according to MAPsignals. It is clear that there is a lot of green recently with this stock. That’s exactly what you want to see when looking for a great growth name.

www.mapsignals.com, end-of-day data sourced from Tiingo.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, Axon’s revenue growth has been strong:

  • Three-year sales growth rate: +25.57%
  • Three-year earnings growth rate: +83.74%

Next up is Align Technology, Inc. (ALGN), which is a leading clear-aligner company. The shares have booming recently. When we decide on the strongest candidate for long-term growth, we typically want to see an outperformer. Align is just that:

  • YTD outperformance vs. market: +72.4% vs. SPY 
  • YTD vs. health care ETF: +77.86% vs. Health Care Select Sector SPDR Fund (XLV)
  • Historical big money signals

Below are the top buy signals Align has made since 2018. That is a strong uptrend recently.

www.mapsignals.com, end-of-day data sourced from Tiingo.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, Align has strong sales and earnings growth:

  • Three-year sales growth rate: +30.76%
  • Three-year earnings growth rate: +35.31%

Another growth name to consider is CyberArk Software Ltd. (CYBR), which is a leading cybersecurity company. When we decide on the strongest candidate for long-term growth, we want to see stock leadership, as those could be the next outlier stocks. A few technical areas we like for CyberArk are:

  • YTD outperformance vs. market: +21.42% vs. SPY 
  • Three-month outperformance vs. cybersecurity ETF: +31.04% vs. First Trust Nasdaq Cybersecurity ETF (CIBR)

Below are the big money signals CyberArk stock has made since 2018. That’s a lot of green.

www.mapsignals.com, end-of-day data sourced from Tiingo.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. CyberArk’s growth rate is impressive. Just look at the past few years:

  • Three-year sales growth rate: +26.12%
  • Three-year earnings growth rate: +55.74%

Number four on the list is GrowGeneration Corp. (GRWG), which is a leader in hydroponics equipment, organic nutrients, and soils. GrowGeneration is a newcomer growth stock. When we decide on the strongest candidate for long-term growth, we consider many technical areas important to success, with a few for GrowGeneration being:

  • YTD outperformance vs. market: +890.24% vs. SPY 
  • YTD outperformance vs. discretionary ETF: +879.78% vs. Consumer Discretionary Select Sector SPDR Fund (XLY)
  • Historical big money signals

Below are the big money signals that GrowGeneration has made since 2018.

www.mapsignals.com, end-of-day data sourced from Tiingo.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, GrowGeneration has been growing revenues handsomely. Wall Street has been rewarding the shares:

  • Three-year sales growth rate: +118.94%
  • Three-year earnings growth rate: -140%

Our last growth candidate is Mitek Systems, Inc. (MITK), which is a leading mobile image and digital identity verification company. When we decide on the strongest candidate for long-term growth, we consider many technical areas important to success. A few bright spots for Mitek Systems include:

  • YTD outperformance vs. market: +128.27% vs. SPY 
  • YTD outperformance vs. technology ETF: +102.54% vs. Technology Select Sector SPDR Fund (XLK)
  • Recent big money signals

Below are the big money signals that Mitek stock has made since 2018. You can see that this stock has been ramping up recently.

www.mapsignals.com, end-of-day data sourced from Tiingo.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, Mitek has been growing sales rapidly:

  • Three-year sales growth rate: +30.96%
  • Three-year earnings growth rate: -41.12%

The Bottom Line

Shares of Axon Enterprise, Align Technology, CyberArk Software, GrowGeneration, and Mitek Systems represent a potential buying opportunity for the long-term investor. Given the strong historical revenue and earnings growth alongside multiple big money buy signals, these stocks could be worth a spot in a growth-oriented portfolio.

Disclosure: At the time of publication, the author holds no positions in any of the securities mentioned.

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