Microsoft Corp (MSFT)

Dragged lower on fears that AI will destroy its business model. Putting AI solutions into products, and that will drive upside. His firm deals in 3-5 year holds (if something's broken, they sell). A multi-year grind higher. Yield is 0.94%.

Three durable growth engines:  Azure, enterprise software, AI monetization. Key is that it keeps turning its installed base into higher-value subscriptions and usage-based revenue, while preserving margins and cash generation. Market's concerned that margins and cash will be pressured as Gen AI gets rolled out through competitors.

Azure remains the clearest growth driver. Key competitive advantage with enterprise software is that one stack bundles infrastructure, security, identity, and data/productivity tools. Raises costs to switch, which provides pricing power. Yield is 0.93%.

Is a core holding. It faces AI takeover fears of their software. He disagrees fully. All he uses is Microsoft and chatGPT, MSFT is protected and is a fine company. Has strong cash flow and can endure a long time. Expects it to rebound.

Big fan. Extremely sticky business. Problem is that market's labelled it as not an AI winner; until that changes, can't see how it'll outperform the likes of GOOG in the next 12-24 months. Safe to keep it for an extended time.

Down 25% this year though the QQQ is up 15% because the chip stocks have become a bigger weighting. MSFT is not executing and pivoting on a daily basis. Co-Pilot has gone from openAI to Anthropic and now Deep Seek. MSFT is still figuring it out. Co-Pilot is still not great.

We don't know their AI strategy and whether they will be disrupted. The market thinks it will.

Very much likes. The 800-pound gorilla since he was a boy ;)  Manages to morph and adapt, even when it makes a mistake (like missing the entire internet in the 1990s). Still has the bandwidth to expand and take over a sector.

It's fallen a fair bit recently over concerns of their spending and them having software in the time of AI. He doesn't expect AI to replace their software. Trades at 18x PE. It's underestimated now like Google was last year.

The lower MSFT gets, the more he likes it. The valuation keeps falling. He recently bought a position and would add to it now. If it holds, that's a very good technical signal. He loves MSFT, but consider that France will forbid the government using Microsoft Teams. That said, MSFT isn't going anywhere.

His preference is MSFT, and he'd buy today. Valuation is ~20x PE -- very fair valuation for business with good outlook for earnings growth for next 3-5 years. A bit more value than AMZN right now. Business model supports a better compounding over the long run, and generates significantly more FCF. Late to the AI race, and that's the reason for the selloff.

No issues with AMZN. Very well run, targeting new markets. You can't own all the tech companies, so you have to pick your spots.