We’ve seen an incredible recovery from the mid-March lows for the Nasdaq Composite (QQQ), with the index now up nearly 80% in 110 trading days, which is the 3rd strongest rally in the past thirty years.
This incredible rally is only behind the near 90% rallies we saw in 100 trading days in Q4 1998 through Q1 1999 and Q4 1999 through Q1 2000, suggesting that the market might be running out of gas here. However, in a low-interest-rate environment with tech companies being the least affected by COVID-19, any sharp pullbacks of 13% or more are likely to be buying opportunities.
Therefore, this is the best time to build a shopping list of the highest-growth names to prepare, in case we see some weakness over the coming weeks. There are several names to choose from, but two stand-out names are Coupa Software (COUP) and Nvidia (NVDA), who have industry-leading earnings growth and a dominant position in their industries. Let’s take a closer look below:
While Nvidia and Coupa Software are both from different industries and don’t have much in common, they share one common trait that the top growth stocks of the past half-century all have, and that’s powerful earnings growth. Since 1950, the top-performing stocks each year were those consistently grew annual EPS by 17% or more each year, with strong sales growth.
When it comes to COUP and NVDA, they both fit this bill, and their double-digit sales growth suggests that annual earnings per share [EPS] estimates for FY2021 might be on the conservative side. While this doesn’t mean that both stocks have to head higher from current levels, it does suggest that they’re great candidates for buying the dip.
Beginning with Coupa Software, the company is a leader in the Business Spend Management Software space, which helps organizations to get the best bang for their buck using Coupa’s intuitive cloud-based platform. The company believes it has a massive TAM of over $50 billion. To date, the company has barely scratched the surface on even 10% of this total TAM, with trailing-twelve-month revenue of $425 million.
However, the company is quickly emerging as the leader in the space, and funds seem to be rushing to start positions, with fund ownership up from 634 funds in Q1 to 840 funds as of the most recent filing.
Given the company’s consistent 40% revenue growth rates, the demand for Coupa shares isn’t overly surprising.
(Source: YCharts.com, Author’s Chart)
As we can see in the chart above, the company has a solid earnings trend, as annual EPS finally flipped positive in FY2019, and grew by…
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