Microsoft Corp (MSFT)

From a fundamental point of view, this is a company that had a monopoly and this monopoly is quickly disappearing. Outside of the PC, which is becoming less of a big story, it doesn’t have the monopoly that it needs to have. Because of this, it is looking to move into other markets, and those other markets carry much lower margins. Good company longer-term but it is in the process of reinventing itself. Dividend is very safe. If you can get this lower, you might be able to trade it. Still early in the transition process.

Stock has been stuck since about 2000 and about the $35 range. Broke out and is now coming back a little to test it. This is a long-term stock that he may hold for a few years. It won’t be without its ups and downs but the earnings a week ago just proved that this company is not a one trick pony. Great story.

(Market Call Minute.) Thinks the value is in the low $40s.

It is dead money. He has little on the books.

This company is up against some headwinds. Primarily anchored in PCs and had trouble because of the size of their operation and how reliant they are on the PC market to really have a meaningful opportunity in other areas. They have become quite a cash cow. The market is telling him that they are not very confident that the growth rate, that this company used to be able to deliver, is going to happen in the future. They are not growing the way they were and they don’t have the opportunity.

He just started going into it. Tends to consolidate and then move up. If it breaks the larger overhead resistance at $39-$40 then it could be a big story. He loves the fundamentals.

(Market Call Minute) Becoming a little more aggressive and valuation is becoming more attractive.

This company came from a monopoly position and is now trying to move into new markets. Has a ton of cash. Feels it has to reinvent itself and to figure out whether it is going to be a growth company or is going to be a slow and steady dividend aristocrat type, which pays dividends and buys back shares regularly. Doesn’t think this is a long-term secular growth story. He would stay away.

The model price is $51, a 36% upside. Tremendous upside.

(A Top Pick Dec 3/12. Up 46.56%.) Valuation has caught up to the earnings. PE multiple expanded because it is a utility business. It was trading at a depressed value because people thought it was going out of business. Earnings are growing and they are buying back stock.

Has been a great investment. There is strategic value within the company. Reported a fantastic quarter. Thinks the company will try to figure out how to return some cash to shareholders, which will include increasing dividends and buying back stock. Strategically they are going in the right direction by migrating their business from a licensed model to software, service and devices model. If you can get through the lumpiness, it should be pretty stable.

Cheap stock. Has a great yield and great products. Great products for the enterprise business. Not expensive. Their businesses generate lots of free cash flow.

A big believer that the large-cap technology companies essentially reinvent themselves to become more shareholder friendly. They generate a lot of money, so they are more than willing to buy back stock and to increase the dividend. If you own for the dividend, this is very safe. This needs to break out of that range where it is no longer just a stable bricks and mortar technology company but go back to the days when it was a higher growth. The Windows operating system is the biggest franchise and they put their cash from that into things like Xbox, Bing and their service and tools business. If they can keep those parts moving and growing, the valuation will continue to move higher putting the stock somewhere up in the $40 range.

Has done exceptionally well in recent months. Very healthy yield of about 3%. There are a few opportunities here, but most of them have started to reflect themselves inside the share price. The gaming console was once a small component part of their business but is now becoming a major part. There is also a new console expected in the next couple of weeks. There is still a wide runway for the commercial adoption of Windows 8.

Have some great businesses for the enterprise which continues to grow and throw off lots of cash. Will be getting a new CEO, which he thinks is important for the company. Great yield of 3.3%.