I spend a lot of time looking at emerging market stocks, and it’s a universe that’s never boring. But occasionally I like to take a look at growth stocks on U.S. exchanges, just to see what’s happening. And when I do, I’m looking for strong growth stocks, i.e., stocks whose charts show that investors are appreciating what they have to offer.
My favorite way to cut down the thousands of stocks that trade on U.S. exchanges to a manageable size is to screen for stocks that have been going up for five straight weeks.
It’s a good screen, because any stock that can advance for five weeks in a row is showing exceptional strength and longevity. Investors are quick to react to trends, news stories and rumors, and avoiding profit taking, sector rotation and general volatility over 25 trading sessions is evidence of great support.
When I ran the Five-Weeks-Up screen on Wednesday, I got just 39 stocks that qualified. The group included quite a few financial stocks, a fair number of logistics companies, a couple of buyouts and a sprinkling of pharmaceuticals. In other words, a pretty good spread of choices, with strong evidence that the sector rotation into financials was alive and well.
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The strong growth stock I chose to write about today was FedEx (FDX), the parcel service that has its fingers in logistics, supply chain management and customs brokerage. About a quarter of the company’s revenue comes from international operations. This is a big company (market cap is over $58 billion and the company is the ninth-largest employer in the U.S.), but it’s sensitive to the health of the U.S. economy. Revenue growth was in single digits for five years before rebounding to 20% in fiscal 2017 (which ended in May).
FDX slowed to a crawl in the first half of 2015, then went over the falls in the second half, slipping from 185 to 120 from June 2015 to January 2016. The stock got moving again, rebounding to 169 in April 2016 and over 200 in December 2016. After snoozing through the first four-and-a-half months of 2017, FDX caught fire again and began its string of up weeks in May. Here’s what the weekly chart looks like.
With a stretch of flat trading from late 2016 to May 2017, FDX has a great base to build on and support from a strengthening U.S. economy that is driving increasing shipping activity. It’s a little on the conservative end of the growth spectrum, but there’s room for that kind of story in a growth portfolio.
If you’re interested in a company in the same industry that’s showing more aggressive growth from a strategy of rolling up smaller shipping companies into a national logistics giant, you can find it in the portfolio of Cabot Growth Investor, where the stock is a solid Buy-rated recommendation. Click here to find out more.
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