Best Growth Stocks for December 2020

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 candidates are Square, Inc. (SQ), The Trade Desk, Inc. (TTD), Paycom Software, Inc. (PAYC), NVIDIA Corporation (NVDA), and SolarEdge Technologies, Inc. (SEDG).

For MAPsignals, we believe that the true tell on the near-term trajectory of a 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 Square, Inc. (SQ), which is a leading payments company. The stock 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 ways in which Square stock has caught our attention year to date (YTD):

• YTD outperformance vs. market: +226.02% vs. SPDR S&P 500 ETF Trust (SPY) 
• YTD outperformance vs. discretionary ETF: +213% vs. Consumer Discretionary Select Sector SPDR Fund (XLY)
• Recent big money signals

Just to show you graphically what our big money activity signal looks like, have a look at all of the top buy signals. Square has shown a strong chart over the past few years. Green bars are showing that Square was likely being bought by an institution according to MAPsignals. It is clear 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.

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, Square’s revenue growth has been strong:

• Three-year sales growth rate: +40.48%
• Three-year earnings growth rate: +55.11%

Next up is The Trade Desk, Inc. (TTD), which is a digital advertising firm. The shares have zoomed for years. When we decide on the strongest candidate for long-term growth, we typically want to see an outperformer. The Trade Desk is just that:

• YTD vs. market: +217.59% vs. SPY 
• YTD vs. discretionary ETF: +204.86% vs. XLY
• Historical big money signals

Below are the top buy signals Trade Desk stock has made since 2018. That is a strong uptrend.

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, The Trade Desk has strong sales and earnings growth:

• Three-year sales growth rate: +48.41%
• Three-year earnings growth rate: +40.97%

Another growth name to consider is Paycom Software, Inc. (PAYC), which is a leading human resources and payroll company. When we decide on the strongest candidate for long-term growth, we want to see stock leadership. Those could be the next outlier stocks. A few technical areas we like for Paycom are:

• YTD outperformance vs. market: +53.79% vs. SPY 
• YTD outperformance vs. technology ETF: +19.33% vs. Technology Select Sector SPDR Fund (XLK)

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

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. Paycom’s growth rate is impressive. Just look at the past few years:

• Three-year sales growth rate: +30.86%
• Three-year earnings growth rate: +63.26%

Number four on the list is NVIDIA Corporation (NVDA), which is a leading semiconductor firm. NVIDIA is a monster 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 NVIDIA being:

• YTD outperformance vs. market: +110.97% vs. SPY 
• YTD outperformance vs. semiconductor ETF: +81.26% vs. VanEck Vectors Semiconductor ETF (SMH)
• Historical big money signals

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

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, NVIDIA has been growing revenues and earnings handsomely. Wall Street has been rewarding the shares:

• Three-year sales growth rate: +18.12%
• Three-year earnings growth rate: +22.15%

Our last growth candidate is SolarEdge Technologies, Inc. (SEDG), which is a leading solar company. When we decide on the strongest candidate for long-term growth, we consider many technical areas important to success, with a few for SolarEdge being:

• YTD outperformance vs. market: +175.89% vs. SPY 
• YTD outperformance vs. technology ETF: +155.76% vs. XLK
• Recent big money signals

Below are the big money signals SolarEdge stock has made since 2018. You can see that this stock has been an incredible growth name with a surge in share price during the coronavirus pandemic.

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, SolarEdge has been in growth mode:

• Three-year sales growth rate: +44.32%
• Three-year earnings growth rate: +37%

The Bottom Line

Shares of Square, The Trade Desk, Paycom Software, NVIDIA, and SolarEdge Technologies 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 a long position in Square but no positions in The Trade Desk, Paycom Software, NVIDIA, and SolarEdge Technologies.

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