Microsoft’s New Market Narrative

Why Microsoft Should Be a Cornerstone In All Portfolios

By Carol K.

First, let me state unequivocally I am NOT a Microsoft (MSFT) product fangirl.  Since 2005, I have only purchased Apple (AAPL) products for myself and my children.

Nevertheless, as an investor, it would be short-sighted to ignore the radical transformation Microsoft has undergone under the stellar leadership of Satya Nadella, who succeeded Steve Balmer as Microsoft’s CEO in 2014.  I evaluate potential investments based on facts and do not allow personal preferences and tastes to distort my analysis of a company’s growth potential and future returns.

Azure

I could go on forever about Microsoft as a multinational technology company, but I digress for the sake of brevity. The well-informed investor is probably already aware of some exciting and highly relevant developments taking place in Microsoft’s Azure platform.

Azure is Microsoft’s Intelligent Cloud platform, and a growing contributor to Microsoft’s bottom line, where the company now derives approximately 35 percent of its revenues.

I am fully aware Microsoft Azure trails it’s rival, Amazon Web Services (AWS), in terms of penetrating the enterprise cloud computing segment.  However, I’ve become aware of some specific applications of Intelligent Cloud and want to share it with our readers.

AI/Machine Learning

These applications involve the power of Microsoft’s artificial intelligence (AI) and machine learning components of the Azure Intelligent Cloud, which are helping biotechnology companies trying to understand Covid-19.

One company, ImmunityBio (privately held) is utilizing Azure’s capabilities in performing computational analysis to gain insight into the complex protein structure of Covid-19. It is now able to build models in a fraction of the time,  in days, which usually took months of the routine computations and analysis.

 COVID Vaccine

Why is this important?

Any vaccine or antibody therapy will depend on this viral protein structure, and the ability to fully understand it is critical to accelerating the development of a vaccine.

Microsoft’s machine learning application is being used by Adaptive Biotechnologies (ADPT) to collect, sequence, and analyze information on the human immune response to COVID from blood samples of patients who have recovered from COVID.  This collection and analysis of immune response data will also be critical in a successful vaccine.

Valuation Issue

We do have concerns about Microsoft’s current stock valuation, however.

It is impossible to deconstruct what is currently driving the stock.  Is all of the above priced in; or is the recent price action more a reflection of America’s newly rediscovered sport of day trading, which has filled the void of this year’s NBA and NHL Playoffs, and the start of the baseball season?.

Microsoft stock is not cheap when valued by traditional metrics.

Most great companies command a premium valuation, however, and going forward, I believe Microsoft is one such company.

AAA Rating

Not only is it is well-positioned for the high-tech future, but it is also one of the best companies on the planet.  Microsoft is only one of two companies in the S&P 500, which sports a AAA credit rating from Standard and Poor’s,  Johnson & Johnson the other.

The company also has a fortress balance sheet and its CEO, Satya Nadella, is generally recognized as one of the most visionary CEOs in the world.

My opinion, which is never intended to be investment advice, is MSFT should be a core position in any stock portfolio and accumulated pullbacks

The Macro Heads at GMM believes another big sell-off is in the works before any new and real long-term bull market can commence.  I am making sure Microsoft is at the top of my buy list if, and when that occurs.

A significant correction would also provide an excellent opportunity to accumulate and build an overweight position in the stock.

If they are wrong about the market and it keeps heading higher, with commission-free trading offered at most discount brokerages, nibbling or buying a few shares at a time, will be an alternative strategy.

Posts Will Be Sporadic

Finally, let me express how thrilled and honored I am to now be part of the group at Global Macro Monitor (GMM).  I commit to doing my best in sharing what has worked for me as a private investor over the years in selecting individual stocks, which has provided considerable alpha to my portfolios in the past, and, hopefully in the coming years.

I have had a little health setback recently, but nothing this former Marine Captain can’t kick in the ass, so my posts may be a bit sporadic in the next few months.

Disclaimer

**I own full positions of MSFT and AAPL and have no plans to buy more shares or sell any shares within the next three trading days. 

The information in this post represents our own personal opinions and are not investment recommendations.  We may or may not hold positions or other interests in securities mentioned in the post or have acted upon what has been written.  

All information posted is believed to be reliable and has been obtained from public sources believed to be reliable. We make no representation as to the accuracy or completeness of such information.

This entry was posted in Coach C, Equities, Uncategorized and tagged . Bookmark the permalink.

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