Microsoft is the
world’s largest independent developer and seller of computer software products
for a wide range of computing devices. It also sells the Xbox video game
console, Nokia mobile phones and the Surface tablet. The company has earned between 25-40% return
on equity over the last 10 years and has grown its earnings and dividends at an
11-20% pace over the last five years. MSFT
was experienced a slowdown in profit growth of late due to the costs associated
with the acquisition of Nokia Device and Services, but should return to above
average earnings growth as a result of:
(1) its dominant
position in the PC market,
(2) expansion
into the mobile space,
(3) investing
heavily in cloud computing,
(4) the Xbox is
growing at an above average pace,
(5) the Bing
search engine is taking market share.
Negatives:
(1) softness in
the core computing market,
(2) intense
competition along with lagging sales in the mobile computing market.
Statistical Summary
Stock Dividend Payout # Increases
Yield Growth Rate Ratio
Since 2005
Ind Ave 1.8 14* 36 NA
Debt/ EPS Down Net Value Line
Equity ROE Since 2005 Margin Rating
Ind Ave 18 17 NA 18 NA
* the vast majority of companies
in MSFT industry do not pay a
dividend
Chart
Note:
MSFT stock made good progress off its March 2009 low, quickly surpassing the
downtrend off its October 2007 high (straight red line) and the November 2008
trading high (green line). Long term,
the stock is in an uptrend (blue lines).
Ditto intermediate term (purple lines).
Ditto short term (brown line).
The wiggly red line is the 50 day moving average. The Aggressive Growth Portfolio owns a 50%
position in MSFT. The upper boundary of
its Buy Value Range is $41; the lower boundary of its Sell Half Range is $76.
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