Investors looking to find stocks with the possibility for major price increases frequently use systematic methods that mix technical and fundamental analysis. One example is the method made famous by Mark Minervini, which concentrates on locating high-quality stocks already in strong uptrends. This process uses a fixed "Trend Template" to sort for technical power, confirming a stock is in a verified Stage 2 advance, and pairs it with strict fundamental screens to identify companies showing speeding up earnings and sales growth. The aim is to find leaders early in their big moves by concentrating on power, not weakness, and by requiring a combination of positive price movement and fundamental business speed.
Heritage Commerce Corp (NASDAQ:HTBK) recently appeared from a screen made to locate stocks that fit both the Minervini Trend Template and standards for high growth speed. This two-part filter process intends to separate companies that are not only technically positioned for more gains but are also supported by fundamental gains that can drive continued results.
Technical Fit with the Minervini Trend Template
The center of Minervini's stock picking starts with his Trend Template, a group of firm technical rules made to verify a stock is in a powerful, confirmed uptrend. Heritage Commerce Corp seems to meet these main conditions using present data:
- Price Above Main Moving Averages: The stock's last price of $13.67 trades well above its rising 50-day ($12.37), 150-day ($10.86), and 200-day ($10.50) simple moving averages (SMAs). This position shows continued buying pressure across short, intermediate, and long-term periods.
- Moving Average Order: The 50-day SMA is located above both the 150-day and 200-day SMAs, while the 150-day SMA is above the 200-day SMA. This ordered positive position of quicker averages above slower ones is a standard mark of a sound, speeding up uptrend.
- Nearness to Highs: A principle of the method is to concentrate on power, not low price. HTBK's price is within 25% of its 52-week high of $13.825, meeting the standard. Also, it is more than 30% above its 52-week low of $8.09, showing major recovery and speed.
- Better Relative Strength: Minervini stresses owning market leaders. With a ChartMill Relative Strength (CRS) score of 85.6, HTBK is doing better than about 86% of all stocks, showing it is a relative strength leader, a key feature for stocks likely to keep doing better.
This technical view indicates HTBK is solidly in a Stage 2 advance, the main phase Minervini aims for with investment. The positive short-term and long-term trends mentioned in the technical report give more support to this positive structure.
Fundamental Reasons for High Growth Speed
While the Trend Template makes sure a stock is technically sound, Minervini's full method requires strong fundamental growth to supply the reason for more price growth. The "High Growth Momentum" part of the screen searches for proof of speeding up business results. Heritage Commerce Corp displays several convincing data points:
- Earnings Speed Increase: Recent quarterly earnings per share (EPS) growth shows a marked speed increase. The newest quarter had year-over-year growth of 64.7%, a major gain from the 41.2% growth in the previous quarter. This sequence of speeding up bottom-line growth is a main sign institutional investors watch carefully.
- Powerful Annual EPS Growth: The company's trailing twelve-month (TTM) EPS of $0.92 shows major year-over-year growth of 39.4%. This shows a strong basic trend in profitability.
- Positive Estimate Changes: Analyst opinion is getting better, a point Minervini notes as significant. The average estimate for next year's EPS has been changed upward by 3.65% over the last three months, showing increasing belief in the company's future earnings possibility.
- Steady Earnings Surprises: The company has topped EPS estimates in three of the last four quarters, with an average beat of 5.48%. A record of going beyond expectations can build investor belief and drive upward price changes.
These fundamental measures are important because, as Minervini states, "big earnings attract big attention." Stocks with speeding up earnings and positive estimate changes often draw institutional buying, which can push prices higher in a continued trend. The mix of strong technicals and getting better fundamentals makes a powerful situation where price movement and business results support each other.
Technical Condition and Present Situation
A look at the detailed technical analysis report for HTBK gives a wider view. The report gives the stock a high technical score of 9 out of 10, noting its steady results across time frames and its position as a market outperformer. It confirms the stock is making new 52-week highs, a very positive sign. However, the report also mentions a fairly low setup quality score of 3, showing that after its recent rise, the stock may be stretched in the short term and not now offering a low-risk, standard consolidation-based entry point. For investors using a strict Minervini-style process, this indicates waiting could be needed, looking for the stock to create a tighter, lower-volatility shape, such as a Volatility Contraction Pattern (VCP), before thinking about an entry.
Locating Comparable Possibilities
The process that found Heritage Commerce Corp can be used systematically to discover other possible candidates. By concentrating on the simultaneous presence of Minervini's Trend Template and high-growth fundamental speed, investors can create a focused watchlist of leading stocks.
For more results from this "High Growth Momentum + Trend Template" screen, you can view the present output here: High Growth Momentum + Trend Template Screen.
Disclaimer: This article is for information and learning only. It is not a suggestion to buy or sell any security. The analysis is based on given data and certain screening standards; it does not make up investment advice. Investors should do their own research and think about their personal money situation and risk comfort before making any investment choices. Please read our full disclaimer here.
