Naughty Flicks

Skip NavigationMarketsBusinessInvestingTechPolitics & PolicyVideoWatchlistInvesting ClubPROLivestreamMenu(This is The Best Stocks in the Market , brought to you by Josh Brown and Sean Russo of Ritholtz Wealth Management.) Josh — In the early innings of the “SaaSpocalypse,” when anything that even looked like software was getting annihilated in the stock market, some of the more egregious sell-offs were occurring in the financial information space. It’s understandable why. People back then were under the mistaken impression that all data, like all software code, would end up being free and plentiful, and that nobody would ever need to look anything up or pay for it ever again. That sounds ridiculous now, knowing what we know about how voracious all the LLMs and agents are for data, and how desperate they are both to train on it and to keep it coming in. Some of the stocks that sold off during that bout of confusion are now back at all-time highs in the aftermath. MSCI (MSCI) is one of those stocks. The letters stand for Morgan Stanley Capital International, but the company started well before Morgan Stanley’s name was on it. In 1968, Capital International, a division of Capital Group, launched global equity indexes that helped institutional investors benchmark their international holdings. In 1986, Morgan Stanley, an early client of that business, took a large stake and secured full rights to the indexes. It added its own name, and that’s how Morgan Stanley Capital International was born. When the company went public in 2007, Morgan Stanley still held a majority stake. It’s just made a monster move out of a long consolidation, and we wanted to put it on your radar this week. Here’s Sean with the story… Best Stock Spotlight: MSCI, Inc. (MSCI) Sean — The chart in the last year looks decent for MSCI, which we’re showing in the risk management section below, but check out this zoomed out version showing price only since inception: One of the technicians’ favorite sayings is — the higher the base, the higher in space. You can see the base from 2022 through today, as it shoots to atmospheric levels. The story here is interesting. MSCI is the company behind the indices much of the investing world gets measured against, including our firm, Ritholtz. Nearly $23 trillion of assets are benchmarked to its indexes, and another $2.9 trillion sits in equity ETFs linked to them, which MSCI collects a fee on. On top of that, they sell risk models, factor models and portfolio analytics to asset managers, hedge funds, banks and sovereign wealth funds. MSCI owns decades of proprietary data and the models built on it, which is exactly what AI needs to be useful. Unlike Salesforce, which got hit this year on fears that AI agents will replace it, MSCI’s clients pay for the data that cannot be vibe coded. In fact it supplies the data the vibe coders need to use. CEO Henry Fernandez went a step further on the Q3 call, arguing that agents could let clients bypass the traditional SaaS layer entirely and take MSCI data from tens of thousands of users inside its client organizations to hundreds of thousands, and eventually millions. In his words, “We have a great franchise for the age of AI.” MSCI reported Q3 earnings on Oct. 20. Revenue was up 12.4% to $892 million and adjusted EPS was up 14% to $5.11, both ahead of estimates. The Index segment was the standout, with revenue up 18% and asset-based fees up 25% on the back of $76 billion of inflows into MSCI-linked equity ETFs during the quarter. Retention held at 95%, and the company posted record recurring net new sales in Index, Analytics and Private Capital Solutions. The stock jumped 5% on the day of the described report and is now up about 20% since the print, sitting near a 52-week high around $675. Wall Street followed with price target increases from Wells Fargo ($720), JPMorgan ($710), Goldman Sachs ($684) and Morgan Stanley ($671), and the stock is already within a couple of percent of the average analyst target of about $684. The stickiness of this company and the value of their data is why this company’s stock looks like a SpaceX launch. MSCI doesn’t guide for revenue, but management guided full-year free cash flow to $1.485–$1.545 billion. This will be a fun one to watch as the AI theme ebbs and flows. Risk management: Josh — Normally we’d show you the 52-week chart above but I need to zoom in here to the six-month view to make my point… We’re going to need to give this one a minute. We don’t want to chase it here, but we must keep an eye on it for entries, because it’s been an absolute beast and I don’t think it’s done going up. MSCI spent the summer and early fall stuck under $645 until the earnings gap Sean described above got it moving. Wednesday’s gap took it through that ceiling, and it closed at $674 near the high of the day. The 50-day at $572 is about to cross above the 200-day at $574, and the 2021 record near $680 is the level to clear. RSI is 79, the highest reading on the chart in a year, and it was in the 30s at the October lows. That’s a stock moving fast, and a breather wouldn’t change the trend. Wednesday’s volume was well above normal, so the buyers are real, but the price is a long way from its moving averages. A pullback that takes RSI back toward the 50s while price holds the gap would be the constructive version. It would let the next push start from a calm reading instead of a stretched one. You can buy it here, but I wouldn’t. The ideal entry — which we may never see — is a retest of the $645 to $650 area on low volume. That’s the old June and July ceiling and the bottom of Wednesday’s gap, two reads pointing at the same spot. That’s not an accident. Light volume on the way down would tell you sellers aren’t showing up in size and the old resistance is holding as support. Heavy volume through it would tell you the opposite. Traders can use $600 as their stop. That’s the low of the late October consolidation, the floor buyers defended before this run. A close below it puts the whole move since the earnings gap in question. Investors can anchor to $587, the open of the Oct. 20 gap and the first price paid after the air pocket. The 50-day at $572 and the 200-day at $574 sit just beneath it. A weekly close below $587 and the earnings gap is filled and the breakout has failed. DISCLOSURES: (None) All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, or its parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL’S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.Read More