Microsoft Corp (MSFT)

You can't make rational sense of market moves in the short term. Market's nitpicking about missing the "whisper" number for Azure. Come on. Short-term blip. Numbers show no evidence that things are going the wrong way; in fact, things are accelerating and improving. 

Rare to find a high-quality company like this trading below 25x PE. He expects topline and bottom line growth by double digits. Copilot's worth the extra $$. Yield is 0.85%.

They reported a top and bottom line beat, but sold hard after hours after issuing higher than expected capex while Azure numbers were only okay.

It reports this week. They last reported good numbers, but their guidance increased capex spending on AI to reverse an earlier statement that they would decrease it. So, shares fell. Also, they reported a slight decline in their Azure cloud business growth rate. He wants them to report no added spending, Azure growth, positive commentary in Co-Pilot, and their core Windows software suite isn't threatened by AI.

Lots going on with the Mag 7 right now. Both GOOG and MSFT lapped AMZN last year in terms of hyperscalers, AI, and data centres; due to AWS not growing as it used to. 

He favours MSFT as a play on data centres and quantum computing. Better that investors choose between GOOG and MSFT as better opportunities than AMZN moving forward.

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.