A gain of 33.81% in 2018 for shares of Intuitive Surgical, Inc. (ISRG) likely couldn’t have happened without institutional accumulation in the stock. Intuitive Surgical shares have been performing very well this year as many growth stocks lead the market higher. What makes this company interesting is that higher share volumes are accompanying the higher share price this year. With activity like that, it should come as no surprise that the stock has trended higher in 2018. We have found that focusing our efforts in looking for companies with great fundamentals alongside potential bullish institutional activity can uncover great performing stocks.
In the perspective of Macro Analytics for Professionals (MAP), the strongest indicator of positive price momentum is obtained by measuring potential institutional accumulation. In 2018, Intuitive Surgical shares logged seven of these rare signals, with the first bullish signal occurring on Jan. 10. This is alongside the bullish action we are monitoring in the healthcare sector as a whole recently. We want to see bullish activity in the shares alongside solid fundamentals and sector leadership, as this indicates that demand for the stock should increase over time. (See also: 8 Stocks That Are Crushing the S&P 500.)
In the chart below, Intuitive Surgical stock broke out to new highs accompanied by increasing accumulation. Shares should continue the upward trajectory:
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.
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When deciding on the strongest candidate for long-term growth, we consider many technical areas important to success. A few of these factors for Intuitive Surgical are as follows:
- Year-to-date (YTD) outperformance vs. market: +29.16% vs. SPDR S&P 500 ETF (SPY)
- YTD outperformance vs. sector: +29.04% vs. Health Care Select Sector SPDR ETF (XLV)
- Bullish potential 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, Intuitive Surgical has solid earnings and sales growth rates:
- One-year sales growth rate: +15.84%
- One-year earnings growth rate: +14%
- Three-year earnings growth rate: +17.07%
Intuitive Surgical checks the box on strong technicals and fundamentals while showing bullish institutional momentum over the past year. We believe that the current level for the shares is in position for further upside. Intuitive Surgical shares have been powering higher this year, and with multiple unusual institutional activity signals, the stock could be setting up for an additional move to the upside. All of this points to further long-term bullish action for the stock.
The Bottom Line
Intuitive Surgical stock represents a potential buying opportunity for the long-term investor. Given the solid earnings growth, sales growth and multiple unusual accumulation signals, this stock could be worth a spot in a growth portfolio. (For additional reading, check out: 5 Stocks to Thrive as Debt Bubble Nears.)
To learn more about MAP’s institutional signals, please visit our “About Us” page.
Disclosure: The author holds no position in Intuitive Surgical shares at the time of publication.