I Like This Company Better Than 2024's Biggest Winner If you run performance screens on stocks valued at $10 billion and higher, one clear winner stands out.
AppLovin (APP) has soared a stunning 730% in 2024.
The next closes stock, Summit Therapeutics (SMMT), is pretty far behind with a still stellar 590% gain.
I've long said that strength begets strength. New highs lead to more new highs. These stocks prove that point.
Momentum is a powerful force, which is why I include it in my Quantum Edge algorithms. In fact, a stock's technicals – or how well shares are trading – weigh more heavily than the fundamentals in determining the all-important Quantum Score.
But I still lean heavily on fundamentals, or the strength of the business. Simply put, the probability of a stock with weak fundamentals moving significantly higher over time is much less than it is for growing, powerhouse businesses.
Sometimes a single event or an outside influence can propel average fundamental companies into above-average stock performance, but there's a higher risk that it will end sooner – and possibly more painfully.
Let's look at the quant ratings for APP, and you'll see why I'm not lining up to buy shares – at least not quite yet. And I'll tell you about a similar stock with better ratings.
Here's what APP looked like when I ran the data during the week... 
Source: Quantum Edge Pro AppLovin's Quantum Score sits in our buy zone at 74.1. That's a strong score, and it's generally a good indicator that higher prices are ahead.
The company helps app developers monetize their products through advertising and find new users. It has primarily operated in mobile gaming, and this year the company began initial efforts to enter the world of e-commerce.
And yes, its software uses AI.
There is an awful lot to like about this stock, starting with its performance. Shares have rocketed nearly 450% just since August as the e-commerce buzz began to build and the company reported solid growth. 
That's a big reason APP's Technical Score is way up there at 85.3. Shares have pulled back a sharp 20% since their high over $417 on December 6, but that has also taken some of the froth out of the technicals.
And yes, Big Money has jumped on board – the money that moves stocks. Here's a sneak peek into my Quantum Edge system, and you can 21 green bars that signify unusual buying activity since the end of August. That boosted shares and the Technical Score. 
Source: MAPsignals.com AppLovin's fundamentals are the one yellow flag in all this. The company's Fundamental Score of 58.4 is not elite, but it is very good. Recent sales and earnings growth is decent, but the steep three-year earnings decline of 713.8% dings the score.
So does APP's high debt, which is a lofty 266% of equity. And valuation is extended after the stock's surge with shares trading at 82 times this year's expected earnings. AppLovin's growth may take off as it creeps further into e-ecommerce. That's why investors have flocked to the stock. But that's investing based on something that could happen – and maybe even should happen – rather than something that is happening.
That's the advantage of relying on data. We don't buy and hope expansion plans will work out, or a turnaround will occur, or a company will get bought. Sometimes things fall into place nicely, but the road to long-term success is often full of twists and turns that delay progress or snuff it out altogether.
When investing in stocks, I need to see what I call the Quantum Edge "trifecta" – elite fundamentals, strong technical, and Big Money inflows. They provide the highest probability of success – 70% historically – which leads to significant outperformance.
APP has the "exacta" with technicals and Big Money, but the fundamentals aren't quite there yet to give us the statistical probability we look for.
This stock, which is like APP, does have the trifecta I need to see... 
Source: Quantum Edge Pro The Trade Desk (TTD) came to my attention in the summer of 2018 when it kept popping up on my screens.
I remember it very well because the market was throwing a tantrum as we were in the middle of a trade war. The news had investors in a panic saying we were looking at a mirror of the 1987 Black Monday crash. Investors had pulled $30 billion out of the markets in the prior month alone.
But I got the necessary signals for TTD in July. These are the data points that most effectively forecast price movement, and not one of them is a description of the business model.
And it was worth it. Over the next few years, The Trade Desk exploded for as much as 1,100%. 
Back in 2018, The Trade Desk had a superior Quantum Score of 86.2. It showed up on my elite Top 20 list with explosive sales and earnings growth. I also learned that it had a phenomenal business model in its software platform for advertisers that makes real-time decisions on what ads to show based on a user's device, identity, and other data.
More than six years later, TTD's Quantum Score is a similarly powerful 81.0. The technicals match the strength of APP, and the fundamentals are far superior at 70.8. 
Source: Quantum Edge Pro Shares are up 75% this year, which doesn't match APP's parabolic moonshot, but is still outstanding... and arguably more sustainable.
Also like in 2018, TTD has appeared on my research firm's Top 20 list four times in less than three months. These are truly the best of the best – the highest-quality stocks in the market with lots of Big Money pouring in.
I recommended TTD to my readers in 2018, and I'm glad I did.
I recommended TTD to my TradeSmith Investment Report readers a little over two months ago, and I'm glad I did. The stock is up almost 20% for us already, shooting above my recommended buy limit.
Data shows TTD has a high probability of making more money over time. APP might as well, but that's less certain, according to the data.
That's the difference between investing on what you think will happen versus investing on what is happening.
It's the outperformance that comes with relying on data instead of emotions. And it's the surest path to success.
Talk soon,   Jason Bodner
Editor, Jason Bodner's Power Trends Speaking of relying on data, my colleague Luke Lango and his team have created a new stock picking tool they've dubbed "Auspex."
Like my Quantum Edge system, Luke's Auspex model analyzes thousands of stocks to find those with a strong fundamental, technical, and sentimental basis. He then narrows the field down to around 10 per month.
Auspex also lets you know if any stocks fall OUT of the top 10 each month – then gets you into the next fast-moving stocks instead.
It doesn't take much time, and those following the Auspex model portfolio have beaten the market's returns in all five months since its live implementation in July. In backtesting, the model was phenomenal long-term as well... outperforming the S&P 500 10-to-1 in a five-year and 20-year period!
The window to access this innovative tool ends soon, so I wanted to let you know about it. Click here to watch Luke's recent broadcast about the Auspex strategy while it's still available and learn all about this new system. | 
No comments:
Post a Comment