The Big Money’s Favorite Number By Lucas Downey, Contributing Editor, TradeSmith Daily Now with the election vote behind us… let’s shift our focus back to isolating great stocks. It’s easy to get distracted by media headlines. Just don’t keep your eye off the ball. Twelve months after an election vote, both large and small stocks tend to crush their average returns. And that’s no matter who wins. With this in mind, I want to shed light on one of my favorite metrics I introduced you to late last month: estimated earnings growth. This simple metric often determines the trajectory of a stock. You want to own stocks where Wall Street continually raises its expectations for growth. If Wall Street sours on the business and thinks it will shrink, ditch that stock as fast as you can. Earnings season is a great time for following this metric. Each report reveals the winners and losers of tomorrow. Pros know it’s the guidance that matters most. Smart money managers are always on the lookout for bright outlooks… and you should be too! Today, we’ll circle back on an up-and-coming restaurant company that I believe has all of the ingredients of a medium- to long-term winning play. And one simple metric helps you spot them early… before the record share rise. Wall Street Analysts Can’t Keep Up With Texas Roadhouse (TXRH) Stock Back in late April, I made the case of why Texas Roadhouse (TXRH) had superstar stock potential. The fire-grilled steakhouse seen across the U.S. not only offers a great meal… it also sports some of the best growth numbers you’ll find in the space. After its latest earnings release, the stock trajectory is only heading north. Just check out the epic equity performance the last year. TXRH has more than doubled the S&P 500 (SPY ETF) with a mouthwatering 82% gain: 
With gains like this, clearly the fundamentals must be in line. Indeed they are. The latest sales figures for Q3 jumped 13.5% year-over-year to $1.27 billion, right in line with analyst estimates. But that’s not what got investors excited. It was the bright same-store sales traffic numbers. The company noted 8.5% comparable restaurant sales growth and 7.2% growth at domestic franchise restaurants. Couple this with price increases for its menu, and Wall Street has to keep updating its models higher. Here’s why the stock has been a stalwart. Back on April 30 when I discussed Texas Roadhouse, the estimated 2024 earnings per share (EPS) stood at $5.67 per share. Fast-forward to today, and that number has been adjusted higher to $6.38: 
Rising earnings estimates are exactly what we want to see. Also note that since the end of January, EPS estimates have ramped up 41%. Take a guess on what the stock has done over the same time period… it’s up 49%. While not an exact science, the earnings trajectory is the most critical metric for equity performance. Get yourself a sticky note and write this down: Companies that grow their earnings have growing stock prices. Yes, it’s that simple. Now for the opportunity… The Big Money Is Piling In Back in April, I showed you how TXRH was loved by institutional investors. It should be no secret that smart hedge funds and big investors are attuned to the growth prospects of Texas Roadhouse. While there’s no guaranteed way to know what the Big Money is buying, following unusual trading signals can offer us clues. Below is an all-encompassing signal that alerts us to unusual buy pressure on high-quality growth stocks. The blue bars are the ultimate outlier spotter. On April 30, I pointed out the multiple inflow signals into TXRH. Look below how three more have arrived… with the most recent occurring right after the earnings report. Folks, to me, this is the “stairway to heaven” that all great equities exhibit… constant institutional sponsorship: 
Couple this power signal with Jason Bodner’s Quantum Score of 77.6, and you’ve got a one-two punch for an exciting opportunity. Any time a firm has a solid Fundamental score and Technical rank, it’s worthy of inspection: 
I’ll be frank. Tracking earnings estimates and analyst guidance isn’t an easy task… Truthfully, you learn the winners after the fact… once the stock has already ripped. But there’s an easier way to find these up-and-comers: by following the Big Money. The Big Money knows how important these metrics are. So all we need to do is follow their buy signals… and jump into the best stocks we see them on. That’s exactly the recipe Jason uses in Quantum Edge Pro… and he’s uncovering all kinds of small- and mid-cap market-beaters hiding in plain sight. Getting ahead of the next big rapid rise isn’t as hard as it seems… just ride the coattails of powerful investors. If your portfolio is in need of some sizzle this post-election season… give Quantum Edge Pro a try. Regards, Lucas Downey
Contributing Editor, TradeSmith Daily | 
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