{"id":1870,"date":"2013-09-17T12:34:32","date_gmt":"2013-09-17T19:34:32","guid":{"rendered":"http:\/\/financegourmet.com\/blog\/?p=1870"},"modified":"2013-09-17T12:34:32","modified_gmt":"2013-09-17T19:34:32","slug":"microsoft-good-investment-now","status":"publish","type":"post","link":"https:\/\/financegourmet.com\/blog\/investing\/microsoft-good-investment-now\/","title":{"rendered":"Is Microsoft a Good Investment Now?"},"content":{"rendered":"

Like many others in both technology and finance, I haven’t really looked at Microsoft<\/a> as more than a staid company in a long time. However, recent events have necessitated a re-examination of the company.<\/p>\n

Is Microsoft a Buy or Hold?<\/h2>\n

In the fantasy world of investment recommendations and analysts, buy, hold and sell, don’t really mean anything. Wall Street firms are reluctant to rate a stock as a sell lest it hamper their chances of getting investment banking business or other lucrative fees from the covered companies. Thus, most investors know that a “hold” rating is pretty much a sell rating. That doesn’t leave much room, so analysts added ambiguous ratings like Market Perform, and Overweight, among others.<\/p>\n

Whether or not it’s smart to invest in Microsoft depends, as always on your goals and risk tolerance. That being said, certain recent moves have made Microsoft an attractive play for an investor looking for a technology sector investment.<\/p>\n

\"microsoftFirst off, Microsoft is a company in flux. Two seismic level events this summer make any investment in the corporation a bit of a leap of faith. The CEO, Steve Ballmer is retiring. Truthfully, there aren’t many who are losing any sleep over that. His tenure has been mediocre at best. However, there isn’t any indication of who the new CEO will be. A dynamic, visionary leader might do amazing, wonderful things with the technology giant. Of course, a one-trick wonder or otherwise less than stellar CEO could continue the company’s malaise. What Microsoft needs is someone with experience with large, market dominate companies. I fear that instead they’ll get someone with gee-whiz, startup experience instead.<\/p>\n

Second, the company recently announced the very large acquisition of Nokia. This is hardly a no-brainer purchase. There are already very large doubts about the ability of management to squeeze much value out of the cell phone maker. However, if it works, it should ensure that Microsoft continues as part of the triumvirate of major mobile operating system makers along with Apple and Google.<\/p>\n

What Makes Microsoft a Good Investment<\/h3>\n

Microsoft announced that it will increase its quarterly dividend<\/a> from 23 cents per share to 28 cents per share. At Tuesday’s market price of approximately $33 per share, that’s over a 3 percent yield. That 3 percent makes waiting for the turnaround a little more palatable. In addition, the board approved a new $40 billion share buyback. While I’m not a big fan of share repurchases<\/a> and would prefer a higher dividend instead, a plan like this helps put a brake on any downward price movement barring any unforeseen catastrophes.<\/p>\n

Keeping in mind the very big uncertainties above, here is what the bullish case for Microsoft looks like.<\/p>\n

The company is trading at a P\/E ratio of just over 12.5. That is by no means overvalued. What’s more, the company has treaded water financially for a decade, but it still is a major player in just about every computing market. The only places where Microsoft trails, it trails to Google and Apple, which isn’t bad company to be “behind.” Unlike both of those companies, Microsoft is a major player across the board, meaning that while Microsoft is #2 or #3 in several categories, it is #1, #2, or #3 in \u00a0EVERY category, while the other two have some fairly substantial N\/A rankings.<\/p>\n

For example, while Microsoft trails both Apple and Google in the cellphone and tablet markets, Apple has no search engine or portal presence, and Google has no server products that a business can run in-house without farming it out to Google. Neither has a gaming platform. Add it all up, and Microsoft has plenty of places to win. If it executes well in just some of its markets and carries second or third place everywhere else, that is still a mountain of income and profits rolling in.<\/p>\n

In other words, after a decade of going nowhere, if Microsoft goes ANYWHERE, there is a lot of upside to its stock price.<\/p>\n

So, is Microsoft a good investment?<\/p>\n

The answer depends on who the company gets as CEO, and then how that CEO moves the company ahead. The aggressive play is to get in now before there is any speculation or announcement about who the new CEO will be. Assuming that the reaction is positive, there could be a pop for the stock, just like when Ballmer announced his retirement. The more cautious play is to wait and see who will be CEO. If there is a negative reaction, but you still like the financials and fundamentals, then the dip in the share price represents a buying opportunity.<\/p>\n

Either way, once you are in, an investor gets to sit on a 3% dividend while finding out how the company will look moving forward.<\/p>\n","protected":false},"excerpt":{"rendered":"

Like many others in both technology and finance, I haven’t really looked at Microsoft as more than a staid company in a long time. However, recent events have necessitated a re-examination of the company. Is Microsoft a Buy or Hold? In the fantasy world of investment recommendations and analysts, buy, hold and sell, don’t really mean anything. Wall Street firms are reluctant to rate a stock as a sell lest it hamper their chances of getting investment banking business or other lucrative fees from the covered companies. Thus, most investors know that a “hold” rating is pretty much a sell rating. That doesn’t leave much room, so analysts added ambiguous ratings like Market Perform, and Overweight, among others. Whether or not it’s smart to invest in Microsoft depends, as always on your goals and risk tolerance. That being said, certain recent moves have made Microsoft an attractive play for an investor looking for a technology sector investment. First off, Microsoft is a company in flux. Two seismic level events this summer make any investment in the corporation a bit of a leap of faith. The CEO, Steve Ballmer is retiring. Truthfully, there aren’t many who are losing any sleep over … <\/p>\n

Read More<\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[161,661,299,338,499,509],"class_list":["post-1870","post","type-post","status-publish","format-standard","hentry","category-investing","tag-dividends","tag-investing","tag-investments","tag-microsoft","tag-stock-analysis","tag-stocks","no-featured-image-padding"],"_links":{"self":[{"href":"https:\/\/financegourmet.com\/blog\/wp-json\/wp\/v2\/posts\/1870","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/financegourmet.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/financegourmet.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/financegourmet.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/financegourmet.com\/blog\/wp-json\/wp\/v2\/comments?post=1870"}],"version-history":[{"count":0,"href":"https:\/\/financegourmet.com\/blog\/wp-json\/wp\/v2\/posts\/1870\/revisions"}],"wp:attachment":[{"href":"https:\/\/financegourmet.com\/blog\/wp-json\/wp\/v2\/media?parent=1870"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/financegourmet.com\/blog\/wp-json\/wp\/v2\/categories?post=1870"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/financegourmet.com\/blog\/wp-json\/wp\/v2\/tags?post=1870"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}