Famed investor Warren Buffett and mutual fund managers have something in common: They've both determined that Bank of America stock has proved to be a winner. BofA and fellow bank stocks Wells Fargo and Morgan Stanley are in or near buy zones right now.
And all three are rallying amid fund purchases after earnings.
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Bank of America Stock Near Buy Point
Bank of America is in a cup-with-handle base with a buy point of 47.98. Other chart signals are also promising. Shares are at two-year highs, which is a positive, while its early-stage base can also lead to higher gains.
Bank of America's fourth-quarter performance proved strong. Sales accelerated sharply from the prior quarter and also grew 15% from the prior year. Earnings growth surged 134% after four quarters of declines.
There are only two flaws to the stock's setup: One is the Relative Strength Rating of 79. IBD recommends at least 80 for this rating. Also the relative strength line is drooping. A rising line shows the stock is outperforming the benchmark S&P 500 index.
Bank of America stock is a top holding in Warren Buffett's Berkshire Hathaway portfolio.
Wells Fargo, Morgan Stanley In Buy Zones
Wells Fargo stock is in a buy zone above an entry at 78.13. Shares are close to their all-time high of 81.50 after an earnings gap up on Jan. 15. The Relative Strength Rating is 89. Sales growth was flat in the fourth quarter, but earnings accelerated, growing 10% from the prior year.
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Shares are in a later stage base though the Accumulation/Distribution Rating — which indicates fund purchases in the last 13 weeks — is a top-notch A.
Finally, Morgan Stanley is in a buy zone above a flat base's buy point of 136.24. Shares broke out and rallied to an all-time high of 142.03 after fourth-quarter results on Jan. 16.
Earnings surged 161% while sales grew 14% from the prior year. Morgan Stanley stock's Relative Strength Rating is 89.
How To Find What Funds Are Picking
One way to find stock winners is to see what mutual fund managers are picking. That is because funds can buy huge lots of a stock and drive the stock price up quickly.
But finding these winners is really a two-step process. The first step is to identify the stocks that funds are buying. Investor's Business Daily's stock screener updates this list of fund picks.
Then it is important to make sure the stock is actionable. This is where the buy point becomes a vital chart tool. Buying a stock as it breaks out of a buy point from a clearly formed base increases the odds of more gains.
On IBD MarketSurge, investors want to see the breakout in higher volume, since volume is an indicator of fund purchases.
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