Microsoft Corp (MSFT)

He recently bought it at a fine valuation. He would average down. It's like a utility--so many people and businesses depend on it. They also have the cloud business. Generates heavy free cash flow. Trades around 17x forward PE with record revenues.

Distribution platform like Copilot and the application suite will benefit from AI spending. Prolific cloud computing business. Cheap. Well run. Value exists today because investors believe all the benefits will go to the OpenAIs and ChatGPTs of the world. In reality, it will be more balanced. 

On $50B in cloud revenue last year, it was growing 31%. This year, projected to grow over 40% on even more revenue. AI continues to be a white-hot race in hyperscalers, which will continue to escalate. 

Interesting name for your diversified portfolio. Yield is 1.01%.

Believes it will continue to be the 800-pound gorilla it always has been. Massive war chest of cash to invest in AI. Not going anywhere anytime soon. Very good track record of getting on board trends one way or the other. 

Won't be back at new highs by year's end, but he'd be happy to be wrong on that.

The fear that AI will eat into software stock revenues is the reason for MSFT's weakness. But he just bought MSFT at 20x forward PE. Fears are overblown but only time can heal these stocks.

Has been hurt by the software stock sell-off (which is silly), so has been weak the last year or so. Revenue growth remains around 10% with some margin upside and continual share buybacks. 15% EPS growth and trades at 20x forward PE. MSFT isn't innovative, but they are fast followers. They already use AI.

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.