MSCI currently trades at $581.48 per share and has shown little upside over the past six months, posting a middling return of 2%. The stock also fell short of the S&P 500’s 13.3% gain during that period.

Is now the time to buy MSCI, or should you be careful about including it in your portfolio? Get the full breakdown from our expert analysts, it’s free for active Edge members.

Why Is MSCI Not Exciting?

We're cautious about MSCI. Here is one reason you should be careful with MSCI and a stock we'd rather own.

Previous Growth Initiatives Have Lost Money

Return on equity, or ROE, tells us how much profit a company generates for each dollar of shareholder equity, a key funding source for banks. Over a long period, banks with high ROE tend to compound shareholder wealth faster through retained earnings, buybacks, and dividends.

Over the last five years, MSCI has averaged an ROE of negative 144%, a bad result not only in absolute terms but also relative to the majority of firms putting up 25%+. It also shows that MSCI has little to no competitive moat.

Final Judgment

MSCI isn’t a terrible business, but it isn’t one of our picks. With its shares trailing the market in recent months, the stock trades at 31× forward P/E (or $581.48 per share). This valuation tells us it’s a bit of a market darling with a lot of good news priced in - we think there are better opportunities elsewhere. We’d recommend looking at one of Charlie Munger’s all-time favorite businesses.

Stocks We Would Buy Instead of MSCI

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