Narrowing down the best stocks, a key component in finding market leaders, is finding big growth in fundamentals. Huge sales and earnings per share growth are pieces to the puzzle, but not everything. Not only does a stock need the growth it needs to be in a leading industry. The biggest winning stocks of all time all have come from a leading industry. A leading industry currently is the Internet-Network Solutions.
We are in a virtual world and part of this world is the internet and delivering services means you need solutions to provide for your customers. Akamai Technologies Inc (NASDAQ:AKAM) is a top stock in the group assisting its customers in delivering content and applications over the internet. It is a top stock for its ability to churn out growth and not to mention institutional support.
Over the past three quarters earnings growth has been as follows: 5, 13, and 17%. Acceleration in earnings growth is a big positive, but it goes for sales growth too. Over the past four quarters sales grew from 5, 12, 14, and 20%. These aren’t explosive numbers, but the 284 funds who own the stock are betting on continued acceleration in fundamental growth.
We can even point out a return on equity of 16% and cash flow at two dollars a share adding to the fundamental picture, but the added benefit is the chart. AKAM has gone onto form a double bottom base, a first stage base. A normal double bottom base looks like a big “W” where the second leg down takes out the first leg down. The midpoint of the “W” should form in the upper half of the pattern, but being a first stage base can cough up great returns.
AKAM second leg down has volume much higher than the first leg which is a flaw, but if volume accompanies a breakout the flaw can be overlooked. The proper buy point is 46.09, but we’ll need to see volume 50% higher than its 50dma to trigger a buy signal. Your cut loss would be if the stock closed below its 50 day moving average.
Disclosure: No Positions