Microsoft Corp (MSFT)

This is transforming itself. It has a new CEO who is really focused on growth. They are really focusing on what is the priority in the technology world, which is Cloud computing and mobile technology. A lot of people feel that LinkedIn was expensive, but it helps them expand its presence in the Cloud application space. Trading at 18X forward earnings and has a pretty decent growth rate of 2.8%. They have delivered an annual dividend growth rate of over 17% over the last 5 years. Dividend yield of 2.8%.

The LinkedIn acquisition is a big risk. Whenever big companies do big acquisitions, it scares him. Most acquisitions either don’t work at all, or don’t work out anywhere near what the company expects. They haven’t bought a lot of companies, but the last one they bought, Nokia’s hardware business, they just finished writing it off to zero.

Has held the stock for a long time and really likes it. The acquisition of LinkedIn is a very big deal, and he can see the value of them doing this. It seems to make a lot of sense.

They have been given a lot of credit for moving away from the PC World and into a variety of other areas, most particularly the Cloud. The new CEO is widely liked and has been given a lot of room by the street to turn the company into a growth company. Just acquired LinkedIn for about $25 billion, which trades at about 7X revenue. LinkedIn has a very spotty financial track record. He wouldn’t buy Microsoft based on this acquisition. Sees Microsoft as an expensive tech stock. There are other areas in the Tech sector that are much more compelling.

There are lots of questions on how they may or may not integrate their acquisition of LinkedIn. They probably can derive some revenue out of this. Doing a good job of converting their revenue base to a subscription base model, both through their office software and their Cloud business. The new CEO said he was going to cut 25,000 jobs so there is room for margin expansion. They still have quite a number of jobs to cut. Have grown their dividend at 11% or 12% a year over the last 5 years.

Microsoft has just purchased LinkedIn (LNKD-N). If they can incorporate this into Microsoft Dynamics and CRM, with the ability of business to talk to business, there are definitely some synergies. Looks like the market doesn’t like this acquisition. Chart shows a pretty significant price gap in 2015, and since then has traded in the range between $50 and $55. If it breaks down much below $50, it would trigger a pretty important technical breakdown, that would target something around $40. If this doesn’t hold the $50 area, there could be trouble.

They are paying a lot for the LinkedIn (LNKD-N) acquisition. Typically, in these cases, the acquirer is the loser. This has struggled to find growth and they have to find it through an acquisition. Whether growth going to come through this acquisition and at such a lofty price, is still up for debate. Would like to see some synergies actually occur.

This was one of the more traditional tech companies that found religion with their new CEO and transitioning to a cloud-based business. This takes a while. They have had some good success, but have also had some issues with some costly acquisitions that may not pan out.

We have a fairly gentle uptrend with an attempt to re-test the highs. It is holding. As long as we stay above $45 it looks bullish.

He likes this. For years and years, this lumbering beast, ineptly managed by the 2 founders, finally got wise and brought in a CEO who understands the Cloud. They have so much room to improve their margins and increase their cash flow, and they are doing it.

A good stock and has a reasonable yield. They are trying to reinvent the company, and it looks like they are having some success. He wouldn’t have any qualms about picking this up.

(Top Pick May 19/15, Down 1.98%) It was doing its job. Model price is $49, 53% upside and he still owns it. They are migrating to a mobile chip. All they need to do is innovate. 3.25% dividend.

(Market Call Minute) A great way to play the space so hang on to it.

A perfect company for a buy and hold strategy, and where you have to pick your spots where valuation is important. He started buying this in 2012 at $24+, when it was trading at 8X earnings. Still reasonably attractive and likes its exposure to Cloud computing and its potential. The runway is massive as only 10% of storage is online.

(A Top Pick Jan 29/15. Up 21.51%.) He is continuing to buy this. They are executing very well and have some great products. The Surface was outselling iPad over the holidays. Their Cloud business is doing well. Thinks there is potential for them to do very, very well. Probably worth in the $60 range.