Microsoft Corp (MSFT)

The tech group led the market all year long. Cloud-based computing is growing like wild fire. In the most recent quarter, they grew their Azure business by 120%. Software, as a service, is very attractive because it is very predictable. In the 1^st few days and couple of weeks after the election, people sold some of the leading technology companies in order to buy stuff they didn’t own. Now there is new money coming into the market, and these companies have not changed their business models. This company is not expensive. It has recently taken out the highs from 2000. Their last purchase of LinkedIn gives them a great opportunity to monetize that business. Dividend yield of 2.47%. (Analysts’ price target is $63.75.)

(A Top Pick Dec 7/15. Up 10.85%.) If he didn’t own a position, he would be buying this today. This company has gone through a bit of Renaissance. It was a tech leader of the 90s, then turned into yesterday’s old technology, but in the last 2 years has had a Renaissance. People now realize that they and Amazon (AMZN-Q) are the global leaders in Web services. This company has certain strategic advantages that could put them in the lead at some point in the future. A great, great generator of free cash flow. Pays a 2.5% dividend, and they buy back shares. Has $63 billion of cash on the balance sheet.

Thinks the new CEO has done a very, very good job of taking a bit of a broken story and resurrecting it. The stock is showing confidence building. The premium has built into the stock, so the valuation has increased and people are paying more and more for every $1 of earnings. However, looking at the fundamentals, this is a very, very large ship that is tough to turn. While they are making great headway in the Cloud and getting a lot of accolades about their Cloud offering, in terms of revenue and earnings growth, it is just not that impactful. He would wait to see how this impacts the company, and pay perhaps a slightly greater price for much greater certainty.

After languishing for well over a decade, they changed CEO and changed their strategy to push into cloud, but AMZN-Q was there first so MSFT-Q was playing catch up. He thinks they are doing a very good job. It is not as good of a time as it was to get in, because the stock has done really well. They are close to a 20 multiple and he does not know if the new business is positioned well enough to capture more share of the market.

He likes this for the Cloud. The runway/opportunity for their Cloud business is just massive. The total addressable market could be up $1 trillion, and this is just getting started. There are probably more acquisitions to come in the future. Dividend yield of 2.63%.

This is a core technology holding for him. Their movement from the desktop to the Cloud has worked out well. They put up a good quarter a short while ago, so they still have momentum. Not overly expensive. He would Buy this on a day when everybody is feeling negative on the market.

A very solid, profitable dividend paying stock, and a major beneficiary of the Cloud. Really solid balance sheet. This will continue to do well. If there is a pullback in the market, this will be a relatively safe hiding place.

It has its mojo back. It has moved back to 10 year ago valuation levels. They have new leadership that is quite impressive. He has reinvigorated it. We have not seen the affects of the new initiatives, so he would stay clear of it and go to some other tech offering for now.

(A Top Pick Sept 8/15. Up 33%.) He still likes this. A very well capitalized company. When you think of the transition to the Cloud, they have certainly done that more successfully than others. Feels they are going to continue to redeploy capital and be able to effect mid-single digit increases if not a single digit increase in earnings and cash flow.

(A Top Pick Sept 21/15. Up 34.2%.) Last year, people started to realize that this and Amazon (AMZN-Q) are the world leaders in cloud computing to a lot of companies.

Sees this as a Hold, more of a market perform. A lot of this has to do with the PC market and with PC upgrades slowing down. Also, doesn’t see any accretive contribution on their recent LinkedIn acquisition. They have struggled with a lot of their mobile applications. Also, revenue growth seems to be pretty meager. They have an enormous amount of revenue from outside the US, so the strong US$ hurts.

(Top Pick Sep 19/15, Up 37.87%) If it pops to EBV+7, $76 it would be a sell. Model price is $62. It just had a positive transit over one of his lines, meaning it is a buy signal.

He likes it. They are very cloud focused instead of hardware focused. He likes it cause of this in the short term. They have a lot of cash. Acquisition should be a lot of the strategy from here. He is not in a rush because they are at 20 times earnings. APPL-Q is lower. The MSFT-Q acquisition of Linkedin is very large and he wants to see how they are integrating it. It will take some time.

The tech sector has strength in October to January and then mid –April to end of July. Watch your short term momentum indicators. The stock is overpriced on a technical basis. Stick with the stock.

(Market Call Minute.) This is going to be an interesting one as earnings are coming up. They have been a little bit spotty in their releases, but another big player in Cloud and subscription based software.