Microsoft Corp (MSFT)

Thinks there is a lot of upside. New management is going to transform the company from software to a Cloud company. This is important because margins are very, very scalable in Cloud. They become more of a service company where they get dollar fee for using their software. Software is very easy to install and maintain, because it is actually maintained and updated by Microsoft. Because of this, there is a cost-saving standpoint from using it.

Past pick Jan 28, 2014, up 5.44% Long term investment. A 12 year level of resistance. He bought on the breakout. a 3 to 5 year play for him. New games, new CEO, lots of new catalysts that could push this stock up.

They generate enough money that they can reinvest in their businesses. They have developed things like Xbox, which has gone to 17% of their revenue. For the stock to move higher there is going to have to be a lot of upside catalysts in terms of their earnings, so it is probably range bound. For long-term holders, he feels the stock is probably worth $40.

From a fundamental point of view, this is a company that had a monopoly and this monopoly is quickly disappearing. Outside of the PC, which is becoming less of a big story, it doesn’t have the monopoly that it needs to have. Because of this, it is looking to move into other markets, and those other markets carry much lower margins. Good company longer-term but it is in the process of reinventing itself. Dividend is very safe. If you can get this lower, you might be able to trade it. Still early in the transition process.

Stock has been stuck since about 2000 and about the $35 range. Broke out and is now coming back a little to test it. This is a long-term stock that he may hold for a few years. It won’t be without its ups and downs but the earnings a week ago just proved that this company is not a one trick pony. Great story.

(Market Call Minute.) Thinks the value is in the low $40s.

It is dead money. He has little on the books.

This company is up against some headwinds. Primarily anchored in PCs and had trouble because of the size of their operation and how reliant they are on the PC market to really have a meaningful opportunity in other areas. They have become quite a cash cow. The market is telling him that they are not very confident that the growth rate, that this company used to be able to deliver, is going to happen in the future. They are not growing the way they were and they don’t have the opportunity.

He just started going into it. Tends to consolidate and then move up. If it breaks the larger overhead resistance at $39-$40 then it could be a big story. He loves the fundamentals.

(Market Call Minute) Becoming a little more aggressive and valuation is becoming more attractive.

This company came from a monopoly position and is now trying to move into new markets. Has a ton of cash. Feels it has to reinvent itself and to figure out whether it is going to be a growth company or is going to be a slow and steady dividend aristocrat type, which pays dividends and buys back shares regularly. Doesn’t think this is a long-term secular growth story. He would stay away.

The model price is $51, a 36% upside. Tremendous upside.

(A Top Pick Dec 3/12. Up 46.56%.) Valuation has caught up to the earnings. PE multiple expanded because it is a utility business. It was trading at a depressed value because people thought it was going out of business. Earnings are growing and they are buying back stock.

Has been a great investment. There is strategic value within the company. Reported a fantastic quarter. Thinks the company will try to figure out how to return some cash to shareholders, which will include increasing dividends and buying back stock. Strategically they are going in the right direction by migrating their business from a licensed model to software, service and devices model. If you can get through the lumpiness, it should be pretty stable.

Cheap stock. Has a great yield and great products. Great products for the enterprise business. Not expensive. Their businesses generate lots of free cash flow.