Microsoft Corp (MSFT)

Let's do some simple analysis. 

MSFT is roughly 5% of the S&P 500. If he wants to beat the market, how much of MSFT should he own in his portfolio? Given where the stock is today, he'd probably be about 2/3 full weight and looking to add on weakness. That's because there's a scenario where it could fall to $325-350.

Right now trading at 25x PE, and it could go to 21-22x if we get another leg down in equity markets. Loves it long term.

When it comes to the impact AI will have on it, the moat's a lot bigger around its IP than some other companies. No one's going to create another widely adopted suite like that of MSFT.

She continues to hold it and would add more shares now. AI is a threat on their Office tools, but this sell-off is overdone, because MSFT has layered in their own AI into these tools. Azure grew 39% last quarter and could have grown faster with more chips available. If AI does well, them Azure benefits tremendously. MSFT has a great track record of innovating and buying companies. They will grow earnings in the high-teens.

There has been a massive sell-off in software stocks where you see rapidly growing, double digit results with premiums almost gone. Microsoft is resilient with lots of growth. It trades at 21 times discounted earnings which is the same as S&P 500. It has a Triple A balance sheet. Revenues and earnings are growing in the mid teens.                       Buy 64  Hold 3 Sell 1

Great earnings, and revenues did quite well, yet stock went down. Capex on data centres is in focus. Azure didn't do as well as market anticipated. 

Only so many GPU chips to go around, so it deployed them to both cloud and Copilot (for AI assistance). That means ~10% of the chip inventory is being monetized, a smart move. 

Another AI agent replacing MSFT 365 would be very hard and require tremendous capital, akin to creating a 7th Canadian big bank. Yield is 0.91%.

People were worried about AI spend, but it has lots of free cashflow. Best debt rating in the world. High ROIC and gross/operating margins. People are going to continue to use its products (not design their own), though the number of seats may be less due to attrition. 

Risk is how much it might spend on data centres without seeing an appropriate return. Will benefit from growth in AI, which is going to be substantial. Yield is 0.89%.

When you can get a company like this at market multiple, you want to jump on that. Azure and cloud are still growing. Still more than 80% of operating desktop/laptop systems in the world. 

Once you're in the ecosystem, especially as a small business owner such as himself, you're not going to leave it. Will bring AI into its product better than anyone. Yield is 0.90%.

He sold this (and all tech) last year. He's watching it though. A great company, but the sector is out of favour. MSFT has support around $380. See if today's bounce last a little while. If it holds, then the next target is the low-$400s.

It was overvalued at $500, but now at $400 it trades at 25x PE, so there's value. He's been nibbling here, but remains underweight for him. He would buy a full position if MSFT fell to $350.

Gave back a lot on the AI trade. At these levels, no problem buying for new clients. A long-term winner. At some point, the AI spending will get to a Jerry Maguire "show me the money" moment for results.

Co-Pilot is a show-me story, but Azure growth is real. Likes it under $400.

He has rotated into Microsoft which fell from $550 to $400. In terms of software, the baby is being thrown out with the bath water. He doesn't expect AI to show profit in the next quarter, but like MSFT long term.

Folks -- every time you get this name trading ~21x PE and growing ~19%, please buy it. Fears of overspending, and will it get a proper return? Most recent quarter saw Azure growing at 39% (which missed the whisper # of 40%). 

Concentration risk -- 45% of commercial backlog is tied to OpenAI. Concerns about Gemini and Anthropic, but he thinks leadership will go back and forth. This one will be hot again.

Steady quarter -- EPS up 28%, revenue up 17%, commercial bookings up 230%. He sees the business accelerating. Yield is 0.90%.

Great entry point. Trading at only 22x PE. You get 15% revenue growth and EPS growth. Caught up in the "show me the ROIC" story. Capex continues to increase dramatically. About 39% Azure revenue growth last quarter (~2% below the whisper number, which always upsets all those fast-money people on the street ;). 

Don't forget about Copilot, ramping up from 15M paid seats to 30-40M over next year or two as people want to increase productivity.

He longer feels that MSFT will be the main beneficiary from AI spending. Their software is prime for disruption. The PE is forecast to be 24x, but he doesn't know what the cap spending will be--it seems to go on.