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Since mid-October, shares of Teradyne, Inc (TER) have gained approximately 16%. The stock has been helped by big buy demand for the shares. This buying has been constant for all of 2019. I wrote about this demand in October, and you can read the post here. Shares have gained over 15% since then.
A great way to uncover tomorrow’s winners is to look for great stocks seeing big buy activity, and Teradyne could be just the opportunity. Smart money managers are always looking to bet on the next outlier stocks … the best in class. For Mapsignals, it’s not enough to look at technicals and fundamentals alone. The key lies in the demand for shares … the big money.
I’ll go into the fundamental picture later, but the true tell on the near-term trajectory of a stock lies in its trading activity. Simply put, it’s all about supply and demand. When demand is higher than supply, the stock rises. When demand is lower than supply, stocks fall. For 2019, Teradyne stock has seen constant demand – i.e., big buying. Semiconductors were one of the best performing groups last year.
For Mapsignals, when we look for an entry on a leading stock, we look for big money signals. Just to show you what our big money activity signals look like, have a look at all of the big money (unusual institutional) signals Teradyne stock has made over the past year. Focusing on 2019, you can see a lot of buy signals (green) throughout the year. What’s happening now is big buying rushing in:
Since mid-October, Teradyne stock has logged 10 big money buy signals, indicative of buying in the shares (see chart above). This shows that traders are likely thinking the shares are poised to head higher. These data points suggest that big money appetite for the stock is high.
If you are going to make a bet on the direction of a stock, it is prudent to pay attention to how the shares are trading. Based on history, the odds suggest that this stock is poised for gains. The big money is always looking for an opportunity to buy shares on the cheap. It’s all about playing the odds by not fighting the trend.
Mapsignals’ goal is to identify tomorrow’s top stocks today. We’re basically looking for outlier companies with healthy fundamentals accompanied by big money signals (outsized institutional activity). We are looking for the big money bets because big money moves stocks. By studying these data points, we can make an educated guess as to which stocks 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 we decide on a long candidate, we consider leaders that have a history of technical outperformance. When they show leadership, we see these as opportunities. Below are a few areas in which Teradyne stock has grabbed our attention:
Now, we take it a step further and score the best stocks showing big money trading activity. Below you can see that Teradyne has recently shown top-rated signals for Mapsignals since 2018. The main takeaway is how the signals tend to precede a lift in the share price. We think a new round of buy signals could be upon us soon:
On top of a long-term technical picture that is strong, one should also look under the hood to see if the fundamental picture supports a long-term investment. As you can see, Teradyne’s earnings growth is very strong, and its revenue growth rate is impressive. We think the semiconductor ramp will cause the revenue growth rate to pop even higher:
- Three-year revenue growth rate: +9.81%
- Three-year earnings growth rate: +50.92%
Teradyne shares are breaking out as the market sits near highs. The company is quietly gaining with demand for its shares. We like the long-term story of the stock. The narrative for Teradyne and other high-quality semiconductor stocks is one of a growth cycle in the years ahead.
We are always on the lookout for great companies pressing higher year after year. The best companies in a group tend to outperform over the long run. Semiconductor stocks have been one of the strongest groups in recent years. All of this points to a long-term opportunity for the stock.
The Bottom Line
Teradyne stock is breaking out with buying pressure. Our big money indicator is signaling that we should take notice. Shares could be positioned for more upside. Given the historical growth in share price and growing fundamentals, this stock could be worth a spot in a growth-oriented portfolio.
Disclosure: The author holds a long position in Teradyne shares at the time of publication.
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