A advance of 70.11% in 2019 for shares of CyberArk Software Ltd. (CYBR) tells a story of a stock gaining alongside a high amount of unexpected trading activity. It’s bullish activity because the shares are heading higher on increasing volumes, indicating that a purchaser is involved. I actually wrote about CyberArk three months ago, detailing the same type of activity. Read the article here. CyberArk pay outs are up 40% since that article.
Over time, we’ve learned how stocks with a history or strong fundamentals favour to rise in price. Smart money managers are always looking to bet on the next outlier stocks … the best in class. The basic criteria we look for when betting on upside in a stock are a history of strong fundamentals, strong technicals and big potential buying in the divide ups.
I’ll go into the fundamental picture in a bit, but the true tell on the near-term trajectory of a stock lies in the trading activity of the shares. Unpretentiously put, it’s all about supply and demand. When demand is higher than supply, the stock rises. When demand is debase than supply, stocks fall. For most of 2019, CyberArk stock has been in a steady uptrend accompanied by increasing sizes.
For Mapsignals, when we look for an entry in a leading stock, we want to see an increase of potential buying. Just to show you graphically what our unorthodox trading activity signals look like, have a look at all of the unusual institutional (UI) signals CyberArk stock has reached over the past year.
Clearly, there has been a lot of green. In our experience, an investor would not want to be on the wrong side of exchange activity like this This stock is notable because shares move based on supply and demand. What is remarkably catching our eye now is the cluster of recent UI buying:
In 2019, CyberArk stock has logged 12 unusually high-volume eras, indicative of buying in the shares starting on Jan. 10, 2019 (see chart above). This points to CyberArk gaining in an unusual way, which suggests that require for the stock is increasing.
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. Just like you don’t call for to fight the trend, you also don’t want to fight a stock that shows increasing price alongside an increase in the capacity traded. Someone could potentially be accumulating a position.
Mapsignals’ goal is to identify tomorrow’s top stocks today. We’re basically looking for outlier gatherings with healthy fundamentals accompanied by outsized unusual institutional trading activity. By studying these data points, we can dream up an educated guess as to which equities institutions are trafficking in and marry this information with fundamentally sound enterprises. We want the odds on our side when looking for the highest-quality stocks.
When we decide on a strong candidate, we consider late leaders that have a history of technical outperformance. When they show leadership, we see these as opportunities. Less are a few areas in which CyberArk stock has grabbed our attention year to date (YTD):
- YTD outperformance vs. market: +55.55% vs. SPDR S&P 500 ETF (SPY)
- YTD outperformance vs. tech sector: +48.23% vs. Technology Restrictive Sector SPDR Fund (XLK)
- Recent bullish unusual trading signals
Now, we take it a step further and score the win out over stocks showing unusual trading activity. These are the outliers. Below you can see the historical times since 2018 when CyberArk ordinary made the top 20 report for Mapsignals. These are the highest-rated signals in our stock universe. Clearly, we caught the big run-up dawning in 2019. That’s exactly what our process is designed to do. We’d even venture to call this stock an outlier:
On top of a specialized 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, CyberArk’s past due earnings report showed year-over-year (YoY) growth:
- Q1 2019 YoY revenue growth rate: +34%
- Q1 2019 YoY GAAP net income expansion rate: +100%
CyberArk is breaking out with other high-quality software names. We believe that the current level for the apportions is in position for further upside. The narrative for CyberArk and other security software companies is one of dominating their space. We are perpetually on the lookout for great companies showing usual trading activity in the shares. The best companies tend to trend considerable over the long run. All of this points to a long-term opportunity for the stock.
The Bottom Line
CyberArk stock represents a implied buying opportunity for the long-term investor. Given the lift in price, historical fundamental outperformance and recent unusual purchasing signals, this stock could be worth a spot in a growth-oriented portfolio.
Disclosure: The author holds no position in CyberArk slices at the time of publication.