The purpose of the IBD Breakout Stocks Index is simple: to alert you to stocks before they break out, as well as to identify stocks in the early stages of a new run. MSCI (MSCI), one of today’s leading financial stocks, shows how this list can help you make more money in the market.
The IBD Breakout Stocks Index works on a three-step system.
First, it screens for the best stocks to watch by looking at both a company’s fundamentals, like earnings and sales growth, and its technical strength. Second, using pattern recognition algorithms, the index zeros in on stocks at or near a potential breakout. Finally, it adds weightings to the selected stocks using IBD SmartSelect Ratings, which are based on the seven common traits of winning stocks.
MSCI cleared this three-step process and joined the index on Jan. 23, then broke out on Jan. 31, giving you time to research the stock as it set up as a new market uptrend was taking hold.
MSCI Among Top-Rated Financial Stocks
When MSCI joined the IBD Breakout Stocks Index, its earnings growth over the prior seven quarters (through Q3 2018) had ranged from 23% to 49%. The New York City-based provider of research-based indexes and analytics to leading investors around the world had also posted five straight quarters of double-digit sales gains.
MSCI was on tap to report Q4 and full-year 2018 numbers on Jan. 31, just six trading days later. While it’s best to avoid buying a stock just before it reports results, be sure to keep stocks near a buy point ahead of earnings on your watch list. They may break out on a strong earnings report, giving you an opportunity to invest without the risk of trying to jump in before the latest performance numbers are released.
When MSCI joined the IBD Breakout Stocks Index on Jan. 23, MSCI already had a 95 Composite Rating, meaning it was already outperforming 95% of all stocks in terms of the most important stock-picking criteria. It also sported an A SMR Rating, which tracks sales growth, profit margins and return on equity as a whole. Plus, the stock was nearing a 166.25 buy point in a cup with handle.
Only one big question remained: How would Wall Street react when MSCI reported Q4 numbers on Jan. 31?
Although earnings and sales growth slowed in Q4, both topped analyst estimates. MSCI’s pretax annual profit margin came in at 43%, and 2018 marked a fourth consecutive year of rising EPS increases.
The stock jumped 4.6% on the news to clear the buy point. Volume was 61% above average, exceeding the 40%-or-higher spike you look for on a breakout. Since then the stock has continued to rally, climbing steadily along its 10-day moving average. As of Tuesday’s close, MSCI had risen to 219.34, a gain of just under 32% in less than 12 weeks. The stock’s 3.2 up/down volume ratio and A Accumulation/Distribution Rating reflect the institutional demand behind that big run.
While not every stock on the IBD Breakout Stocks Index will make that type of move, the profits in MSCI show why it can pay to check the components of the index when they get updated every Tuesday after the market close.
IBD Breakout Opportunities ETF
The IBD Breakout Opportunities ETF from Innovator Capital Management tracks the IBD Breakout Stocks Index. As with other index ETFs, this allows you to essentially invest in the entire index in addition to or rather than buying individual stocks. Learn more about the ETF and Innovator funds.
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