Thursday, May 04, 2006

Microsoft MSFT is the Money Stock For Tomorrow

ThinkEquity's Michael Moe has a new post up on the ThinkBLOG about why china is the next big thing for the next 50 years. Buried at the bottom is his wise observation:

Microsoft jilted its many loyal fans by saying it was going to ramp up its investments to more aggressively compete for global web dominance. $32 billion of market value was taken off of Microsoft shares on Friday. I hate to say it, and it's the first time in a long time, but MSFT stands for "Money Stock For Tomorrow"; the company is doing the right thing and buying at $24 will be very rewarding over the next couple years in our opinion.


Microsoft (MSFT) is the Consolidated Edison (ED), United Gas Improvement Corporation (UGI), American States Water Company (AWR), and United Illuminating Company (UIL) of the information age. It is cheap at $24 with %1.50 dividend yield. Just because the build out of the software infrastructure of the information age is mostly complete, does not mean that Microsoft is obsolete. Just like Intel, momentum chasing technology investors have abandoned Microsoft. The MoMo investors are ignoring the enormous underlying strength and profitability of MSFT's monopoly franchise. In many ways Microsoft has become similar to a public utility corporation: they have a stable monopoly, are very profitable, tend to grow in a slow and accretive manner, and pay generous dividends.

4 Comments:

At May 04, 2006 2:20 PM, Anonymous allan said...

Just accepting the concept of Microsoft as a dividend paying utility type stock will take some adjustment.

If that is the case there will probably be a period of fluctuating valuations as the tide of investor styles ebb and flow.

I may have already missed much of that.

I'll take another, different look at MSFT.

Thanks

 
At May 09, 2006 7:29 PM, Anonymous sinnerMan said...

Generous dividend? At 1.5%, the dividend yield is below the S&P 500 average and way below what most utilities and communication companies offer. Suburban Propane (SPH) would probably be more appropriate.

I agree that there is a chance Microsoft could do well in the long-term, but as I mentioned in the May edition of SINLetter, in the short-term it is best to stay away from Microsoft.

 
At May 12, 2006 2:18 PM, Anonymous Anonymous said...

Why does anyone care about the short term? Long term is what matters.

 
At May 14, 2006 3:23 PM, Blogger Market Participant said...

MSFT will increase their dividends over time.

Microsoft is going to do well in the long term. Contrary to what the linux folks think, modern versions of windows and MS Office are decent enough for almost everyone.

 

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