Apple (AAPL), Microsoft (MSFT), Alphabet (GOOGL), Nvidia (NVDA), Amazon.com (AMZN), Meta Platforms (META) and Tesla (TSLA) are all Magnificent Seven stocks. But only MSFT stock makes the highly selective IBD Long-Term Leaders list.
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Note that Microsoft also just topped the latest list of new buys by the best mutual funds, raking in a whopping $17.4 billion from these high performing money managers. The artificial intelligence and cloud giant was the only one of the Magnificent Seven stocks to make this screen.
At one time, GOOGL stock also earned placement as an IBD Long-Term Leader but has since fallen off. So why do artificial intelligence leaders and tech powerhouses NVDA, AAPL, AMZN, META and TSLA also not make the list?
In a word, earnings stability. While strong quarterly and annual earnings growth is essential, it’s even better when steady.
Earnings Stability: Secret Sauce For MSFT Stock Investors
Along with solid growth and price performance, earnings stability forms the foundation for placement among the IBD Long-Term Leaders. It’s an approach that blends the investing strategies of two great investors: Warren Buffett, head of Berkshire Hathaway (BRKB), and IBD founder William J. O’Neil.
Buffett uses the classic buy-and-hold strategy, finding great long-term investments and holding them for years at a time. Simply put, O’Neil’s CAN SLIM method entails actively trading high-growth stocks over weeks and months, rather than Buffett’s years-to-decades style.
Based on three to five years of earnings’ history, the earnings stability rating provides a scale ranging from 0 to 99. Unlike the higher-the-better Composite Rating, lower numbers represent more stable company earnings history. Microsoft currently earns a strong 6 rating.
Nine other companies join Microsoft on the IBD Long-Term Leaders list, including Cadence Design Systems (CDNS), KLAC (KLAC) and Synopsys (SNPS).
You can find the Earnings Stability number in each stock’s weekly chart in MarketSmith.
Microsoft Leads Magnificent Seven Stocks In Earnings Stability
| Company | Symbol | Earnings Stability | Comp Rating | EPS Rating | RS Rating | SMR Rating | A/D Rating |
|---|---|---|---|---|---|---|---|
| Microsoft | MSFT | 6 | 95 | 97 | 88 | A | B- |
| Apple | AAPL | 12 | 76 | 91 | 71 | B | B- |
| Alphabet | GOOGL | 15 | 94 | 97 | 83 | A | C- |
| Meta Platforms | META | 23 | 99 | 95 | 96 | A | D+ |
| Nvidia | NVDA | 28 | 99 | 99 | 97 | A | E |
| Tesla | TSLA | 31 | 75 | 88 | 86 | B | C+ |
| Amazon.com | AMZN | n/a | 93 | 82 | 90 | C | B |
MSFT Stock Holds Up While NVDA, TSLA, AAPL Slip
After a stellar 2023, the Magnificent Seven stocks ran into some resistance to kick off the new year. Apple stock has dropped below its 50-day moving average to now test its 200-day line after getting another downgrade as Wall Street sours on the iPhone maker. Tesla has fallen beneath the 21-day exponential moving average but has so far found support at its 50-day benchmark.
Landing on multiple buy lists for 2024, Nvidia stock has shown resilience, bouncing above its 21-day line, as has Meta stock. GOOGL stock and Microsoft also now trade below that line.
Amazon has retreated to test its 50-day moving average.
On a weekly chart, Microsoft has held relatively tight, now building a flat base as part of a base-on-base formation. This new pattern offers a 384.30 buy point following a breakout in November.
The chart for MSFT stock shows institutional investors maintaining their positions. While several analysts have put Microsoft on their lists of top picks for 2024, it continues to feel pressure, closing lower for the first trading week of the year. It now faces a test of its 50-day line heading into week two.
As the setups and pullbacks in Microsoft and the other Magnificent Seven stocks play out, keep a close eye on the market indexes. The tech-heavy Nasdaq has stumbled in the first days of trading in 2024, falling below the 15,000 mark and now its 21-day line. But it remains well above its 50-day line.
See if selling pressure subsides and continue to monitor any changes in IBD’s recommended market exposure level. On Wednesday as the indexes continued to pull back, the recommended level got reduced to 60% to 80%, down from 80% to 100%.
Follow Matthew Galgani on X (formerly Twitter) at @IBD_MGalgani.
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