Microsoft Corp (MSFT)

(A Top Pick Sept 7/11. Up 7.02%.) Feels it is being overlooked because it was so well owned 12 years ago that there is still residual distribution pressure on it as fund managers get redemptions. 11% earnings yield and 3.5% dividend yield and no net debt.

Had record earnings, raised dividend. Surface tablet nonsense is a side show. The focus is the enterprise side and the Xbox plus things we don’t know about. It’s too cheap at 8x earnings.

It is going to take a while for Windows 8 to get traction. Usually bought when they are turning over system in their office. It has been unduly trashed at this point. It is way too low and is a solid company with good dividend yield. There have been a number of special dividends from US companies with a lot of cash on the balance sheet. She doesn’t know if this might happen here or not. At this price she would not sell it.

(Top Pick Nov 2/11, Up 4.22%) Keeps buying it because it has come off. They have some good products on the enterprise side. You won’t see it until second half 2013. On the consumer side it is much harder to compete with AAPL-Q. People are waiting for the next generation of Surface that will run Microsoft Office.

He just saw a new Microsoft store and is 5 times bigger than the Apple store in the same mall. The place was packed. People are kicking the tires. Hears that the new O/S is not selling like hotcakes. Most of Bay Street is just going from XP to 7.

Starting to enter interesting levels. 10 time PE. Long term support around $20. Sell off here is a deferral on sales of Windows 8. Thinks there will be a seasonable push with the release of Call of Duty. The Surface tablet could be construed as another toy for Christmas but the key is its ability to integrate. 3.4% yield.

The sector corrected. MSFT is a cash cow. It is a mature company. It is like a GIC that pays a little more. Don’t expect growth, but you won’t get growth. There are no drivers.

Move to the sidelines. Not tremendous risk, great balance sheet, but the problem is that the PC is under fire (it is declining).

A software executive that had been with them for 23 years suddenly left the company and this was a surprise and viewed as a negative because he was seen as eventually taking over as CEO, so there is definitely change going on. Windows 8 has not done much and was disappointing. Their tablet was launched and was met with modest demand, but they have a supply issue. Lots of cash and trading at single digit multiples. They are trying to reinvent themselves and are going into hardware, which may not work. Market doesn’t like uncertainty.

(Market Call Minute.) Not so sure about Windows 8. Has gotten some pretty mixed reviews. Prefers others.

He is warmish, but not hot on this company. Likes the prospects for their operating systems because the previous one was so bad that a lot of people will be upgrading just to escape. The negative is that PC usage in general is not growing anymore and is declining. A lot of people are using tablets.

For the 1^st time in a long time they have a product that is very well reviewed and hopefully will have some excitement in the market. Windows 8 is refreshed and replacing Windows 7 so he thinks this will drive the upgrade cycle by a lot of PC users. They have momentum and whether or not they can sustain it depends on how well they execute. He is closely watching this one but would like it in the with $25-$26 range.

(A Top Pick Oct 6/11. Up 10.06%.) Doesn’t feel they are competing with others as much as having Windows 8 and their Surface Tablet consolidate their position in the enterprise space. Accumulative, all those things together will be good for this company. Thinks that they will continue to do well and will give you 10%-15% annual return. Still a Buy.

Windows 8 is coming out Friday and they also have the Surface Tablet which is getting mixed reviews. Doesn’t think the tablet is going to change anything but Windows 8 could. The difficulty is that they have pent-up opportunity and demand for Windows 8 but on the other side PC growth has fallen off a cliff, and desktop growth is not doing that great. It’s just not getting any traction.

(Market Call Minute.) Recently sold his holdings on concerns of the move from PCs to tablets is having a more significant impact on their business.