Microsoft Corp (MSFT)

Is the largest software company in the world, but also have a fast-growing, massive cloud business plus OpenAI to increase cloud sales. But AI is disrupting their Office 365 business. Their CoPilot worked poorly at first, but suddenly improved a lot. 

It has been kind of out of favour but has a track record of innovation. It had the foresight to invest in AI in 2019. It has transitioned to a recurring revenue operation with a monthly subscription system. It can package together a base of suites which gives it a strong competitive moat. It is very profitable with operating margins over 40%. Also has a very strong public cloud business. Capital spending has increased along with all the other big techs but has the flexibility to pull back according to demand.         Buy 71  Hold 2  Sell 0

It has a number of drivers but the incumbent business took it to where it was. There are a number of catalysts such as AI and it has kind of re-invented itself. Sees a reasonable growth trajectory ahead of it. With AI, unless profitability starts to show up in volume, then we would see a slowdown. Google and the metrics of the underlying returns of Amazon's data centre business look interesting.

Shares have been punished for its heavy AI spending. Down 7.7% in 3 months. A high-quality company. Must buy it at current levels of weakness.

Is a long-term buy and hold. Has owned this for 20 years. Would add now. Not worried at all about this pullback. Is the #1 recurring revenue business in the world. Not expensive. Is massive and trades at a beta of 1. Will beat the market long-term. As high a quality as you can get. Clean balance sheet. 24% return on capital. They make great products. The top software name.

By the rules, he can't make a Past Pick a Top Pick; otherwise, he would have. Can't get enough chips to meet demand. This company (along with AMZN and GOOG) is going to distribute AI through the cloud into our day-to-day lives. Remains extremely bullish on it.

Amazing business, but at 35x PE is a little expensive. Return on capital is trending down a little. Is one of his largest positions. If you own this, continue to hold. Enter this 20-30% lower around the low-20s PE.

Still has everything going for it. Pullback is a good opportunity.

MSFT is a player in AI and second-best in the cloud (second to AWS). Growth is impressive.

It is an AI beneficiary as well as showing lots of strength in the non AI parts of the business eg. the cloud component and office suites. It is not reliant on advertising. It is at a good entry point to buy.

Announced this morning that a handful of clients are shying away from adding to their AI infrastructure. People bought, and they want to see how it works before they buy some more. (Kim's immediate thought was, oh no, it's one of his Top Picks :(  But this recent pullback/consolidation is a great opportunity. 

About 40% of revenue still comes from Azure (cloud side). Some pressure on free cashflow. Forward PE and price to sales metrics are in line with the 5-year averages. Good time to buy a leader. So many horses in the race on both software, hardware, and AI. Yield is 0.76%.

Short-term breather is an opportunity to get all her clients to a full-weight position. Heartbeat of the enterprise cloud that's driving the next leg of growth. Expanding AI ecosystem, which reduces dependence on any single provider. This will help support long-term innovation and flexibility. 

Not as worried about financial circularity on this name. Still a leader in the space. Growth not as concentrated as some of the other tech names. AI runway is still early, and MSFT is positioned to benefit. Ranks 10/10 fundamentally, sees 30% upside from here. Yield is 0.74%.