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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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At one time, GOOGL stock also earned placement 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 | 96 | 97 | 88 | A | B- |
| Apple | AAPL | 12 | 77 | 91 | 74 | B | B- |
| Alphabet | GOOGL | 15 | 96 | 97 | 85 | A | C- |
| Meta Platforms | META | 23 | 98 | 95 | 96 | A | D+ |
| Nvidia | NVDA | 28 | 99 | 99 | 97 | A | E |
| Tesla | TSLA | 31 | 78 | 88 | 85 | B | B |
| Amazon.com | AMZN | n/a | 93 | 82 | 91 | 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, getting another downgrade as Wall Street sours on the iPhone maker. Tesla has fallen beneath the 21-day line but remains above its 50-day benchmark. On Thursday, Nvidia closed up and right around the 21-day line, Meta stock bounced off that line.
GOOGL stock bounced off its 21-day exponential moving average Wednesday, but fell back below it on Thursday. MSFT stock continues to test that line, closing below it on Thursday. Amazon retreated to test its 50-day benchmark.
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 tight, healthy trading in MSFT stock shows institutional investors maintaining their positions. But Microsoft continues to feel pressure, closing lower for a third straight down day.
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.
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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