Should You Follow Big Money and Ditch Upstart?

So, what’s Big Money? Said simply, that’s when a stock goes down in price alongside chunky volumes. It’s indicative of institutions selling the shares.

Smart money managers are always looking for the next hot stock. And Upstart has many fundamental qualities that are attractive. But sometimes when values decline, money managers look to sell or may be forced to liquidate.

This downward movement creates uncertainty for the stock going forward. And as I’ll show you, the Big Money has been exiting the shares recently.

You see, fund managers are always looking to bet on the next outlier stocks…the best in class. They spend countless hours sizing up companies, reading reports, speaking to analysts…you name it. When they find a company firing on all cylinders, they pounce in a big way. But Big Money sells too, especially when the situation changes.

That’s why I’ve learned how critical it is to gauge Big Money demand for shares. To show you what I mean, have a look at all the Big Money signals UPST has made the last year.

We’ve recently seen Big Money selling activity. Each red bar signals big trading volumes as the stock price dipped:

Source: www.mapsignals.com

In the last three months the stock attracted 14 Big Money sell signals. Generally speaking, recent red bars could mean more uncertainty is ahead.

Now, let’s check out technical action grabbing my attention:

• 1-month underperformance vs. Financial Select Sector SPDR Fund (-45.1% vs. XLF)

Vast underperformance is an obvious red flag for leading stocks.

Next, it’s a good idea to check under the hood. Meaning, I want to understand the fundamental story too. As you can see, Upstart has been growing sales and earnings at a double-digit rate. Take a look:

• 3-year sales growth rate (+60.3%)
• 3-year earnings growth rate (+18.3%)

Source: FactSet

Marrying great fundamentals with technically superior stocks is a winning recipe over the long-term. But when there is disagreement between the two, it could mean the situation has changed. Or it could be a huge long-term value play on a great stock.

In fact, UPST has been a top-rated stock at my research firm, MAPsignals. That means the stock has had buy pressure, strong technicals, and growing fundamentals. We have a ranking process that showcases stocks like this on a weekly basis. Usually when selling dries up, great stocks rally again.

UPST has had a lot of qualities that attracted Big Money. Since it began trading in late 2020, it’s made the MAPsignals top list 9 times, with its first appearance on 3/23/2021, and losing -1.29% since.

Despite the recent decline, the fundamental story is strong. The blue bars below show the times that Upstart was a top pick since 2020:

Source: www.mapsignals.com

It’s been a top stock in the financial sector according to the MAPsignals process. I wouldn’t be surprised if UPST reappears on this list in the years to come. Let’s tie this all together.

The Bottom Line

The Upstart decline makes the stock look oversold. Big Money selling in the shares is signaling to take notice. Given the historical gains in share price and strong fundamentals, this stock could be a huge value play long-term and still worth a spot in a growth-oriented portfolio.

Disclosure: the author holds long positions in UPST in personal and managed accounts at the time of publication.

Learn more about the MAPsignals process here.

Disclaimer

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