This humble company is firing on all cylinders⦠[TradeSmith Daily]( A âMeat and Potatoesâ Superstar Stock in the Making
By Lucas Downey, Contributing Editor, TradeSmith Daily The hunt for superstar stocks in the making should be the goal of any investor. You know the ones Iâm talking about... the Apples (AAPL), ExxonMobils (XOM), and McDonaldâs (MCD) of the world. Companies that dominate their industry year after year... decade after decade. The trick, of course, is finding them long BEFORE they become superstars. Iâll admit, thereâs no bulletproof way to do this... But there is an easy-to-follow recipe of factors that all-star stocks exhibit year after year. This playbook has helped me find growth stalwarts like Netflix (NFLX), Microsoft (MSFT), and Chipotle Mexican Grille (CMG) early on... which Iâm fortunate to still hold today. Trust me, I donât hit a homerun all the time... far from it. But Iâve learned that it only takes a handful of mega-winning stocks to more than make up for all the losses along the way. So today, Iâm going to zero in on an up-and-coming company with top-notch qualities that should be on your watchlist right now. More importantly, youâll learn three great, repeatable datapoints to help you spot stocks with explosive potential. For those keeping tabs, this is how we spotted [Deckers Outdoor (DECK) in October]( and [health care giant Eli Lilly (LLY) in January](. Iâm happy to say these calls didnât disappoint â DECK has gained 35% and LLY has ripped 14% since those posts. Letâs do it again, but with a smaller, lesser-known all-star. Stay with me until the end, and Iâll show you a one-click method to easily separate the contenders from the pretenders on your hunt for superstar stocks. RECOMMENDED LINK [Could Elonâs New Device be Bigger than the iPhone?](
According to 30-year Silicon Valley and Wall Street veteran, Eric Fry... A man who picked 41 plays that jumped 1,000%+... [This mind-blowing new technology]( could be bigger than the iPhone. And it could make a lot of people wealthy in the coming months and years. Betting on Meat and Potatoes
When it comes to finding the best long-term winners, stick to a simple-to-follow formula. You want to focus on:
- Revenue growth
- Earnings growth
- And continual institutional support
After trading on Wall Street institutional trading desks, I quickly learned how important these traits are for long-term success. And one company, restaurant chain Texas Roadhouse (TXRH), has this playbook in spades. If youâre not familiar with TXRH, theyâre about the simplest business on Earth. They operate big restaurant chains Texas Roadhouse, Bubbaâs 33, and Jaggers. And no matter the name on the door, their establishments offer one of the best steak dinners at a reasonable price all over the U.S. They operate 741 restaurants across all their brands. It doesnât get more American than meat and potatoes. And business has been booming over the years. Letâs size up this up-and-comer with the three factors I mentioned above... Step 1: Follow revenue growth.
Stocks track the overall health of a business. Isolate growing businesses as your first step in evaluating a potential good investment. Texas Roadhouse released fourth-quarter earnings in February and reported a revenue surge of 15.3% from the same quarter the year prior. And thatâs no short-term anomaly. From 2018 to 2023, TXRH sales grew from $2.45 billion to $4.63 billion. Next-year sales are set for double-digit growth with estimates of $5.28 billion:
All in, TXRH has grown at a 12.5% compound annual grow rate over the past six years. Double-digit growth like this is hard to find, especially when it happens year after year. Thatâs evidence the business is steadily growing. This is a fabulous first step for outlining a top-notch stock. But letâs keep going... we need to see the bottom line. Step 2: Record revenues should turn into record earnings.
Itâs one thing to grow your revenue. Itâs another for earnings to steadily rise alongside it. Growing earnings indicates a solid business model, where leadership can reinvest profits for future growth. From 2018 to 2023, TXRHâs diluted earnings per share (EPS) doubled from $2.20/share to $4.54/share. Earnings are set to further zoom with $5.67 EPS forecast for in 2024:
Iâm sure you can see that earnings took a huge hit in 2020. The pandemic wreaked havoc on restaurants. But the important message, and true test of a quality enterprise, is that business bounced back bigger and better the very next year. And when sales and profits are surging, you can bet Big Money investors will be along for the ride. RECOMMENDED LINK [Bigger Than Nvidia?](
Wall Street legend has just uncovered one tiny Maryland company that could become the next Nvidia. Few in the media are talking about this story yet... but in the next 6 months thatâs all theyâll talk about.
[Go here now for this breaking story]( Step 3: The Big Money is the best tell.
Savvy investors like hedge funds spend countless hours looking for companies with an edge. When they spot a business firing on all cylinders, they jump in. I learned this from my days on Wall Street, handling large stock orders for big money managers. They were constantly betting on the leading stocks in a certain category. Think Chipotle with burritos or Apple with iPhones. I see Texas Roadhouse as the leader in homestyle, fire-grilled food. Now, thereâs no way to know exactly when institutions are buying a stock. But by tracking unusual trading volumes and price relationships, you can make an educated guess. Below shows you an all-encompassing signal that spots unusual trading volumes married with solid fundamental characteristics. Texas Roadhouse is one of the few companies that have been beaming with this signal over the past decade. Below is a chart of TXRH since 2014. The repeated blue bars represent each time the stock saw unusual volumes while TXRH ranked very high for fundamentals:
Few stocks have charts like this. And the ones that do, tend to have fabulous businesses that institutions love. Which brings me to my final point of how you can scan for companies of this caliber very quickly, without doing a lot of heavy lifting and searching. At TradeSmith, subscribers can score any stock like TXRH and get a unique Quantum Score. This rating system quickly analyzes any stock and ranks it for fundamentals like sales and earnings growth, and technical attributes like relative strength and institutional support. As you can see, TXRH is well in the green buy zone with a rock-solid 79.3 score:
The Quantum Score keeps it simple... meat-and-potatoes simple. Here at TradeSmith, weâre proud to publish an advisory dedicated to finding stocks with these rare attributes â the [TradeSmith Investment Report](. It uses the same factors we discussed today to uncover great mid-cap stocks on their way to becoming major stock market juggernauts. Later this week, weâre recommending another champion name with accelerating earnings, sales, and institutional support. (You can [click here to learn more about a subscription before the newest issue drops]( You should also know that members of TradeSmith Investment Report get access to the Quantum Score tool to look up any stock they want... at any time. Itâs a must-check indicator before you put your hard-earned money into any ticker. [Click here for details on how you can start using it for an entire year for just $49](. Regards, Lucas Downey
Contributing Editor, TradeSmith Daily P.S. In the next week, your editor Michael Salvatore and I will get together for another video analysis session â like we [shared here](. This time, we want to hear about the top stocks on your radar... and weâll tell you what we think of them, using TradeSmithâs tools. Go ahead and write us at feedback@TradeSmithDaily.com with whatâs on your watchlist by this Friday, May 3, and weâll look to cover it in our next video. Get Instant Access
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