MSFT

[Guest Bronco]

Prunes - just my opinion, but it doesn't sound as bad when you say it like that.

[prunes]

The value line survey for HPQ is actually free: http://www3.valueline.com/dow30/f4341.pdf

 

To say that HPQ is very cheap by historical standards would be an understatement.

[prunes]

The rumor mill is talking about MSFT incorporating Kinect technology into Windows 8. Done right, that would be a game changer:

 

http://www.winrumors.com/microsofts-kinect-integration-spotted-inside-windows-8/

[ERICOPOLY]

Eric, historically, buying stocks that I buy is a sure path to poverty.  Hopefully, this time is different.

 

I don't know Bronco, so far this day trading your idea is thrilling.  GOOG calls up right away and MSFT calls down 17%.  So I got the MSFT calls back today :-).  Keeping the GOOG.

[onyx1]

MSFT... Stock may be stuck at $25 for a while, I have puts sold at $20.  

 

I am very constructive based on the underlying fundmentals, but its a large, large cap and it may well be a slow grind to higher levels.  I'm long the 17.5 Jan 2013 calls (they just traded .27 over intrinsic value so they are not expensive at all relative to the underlying).  I have also been selling 1-3 point otm calls every two months aginst the position.  So far, its working well.

[ERICOPOLY]

MSFT - stop the buybacks, pay a dividend, get with the apps, fire Ballmer, hire me.

 

The divvy is up to 2.5% now and probably growing at 10-15% a year.  I am leaning towards the higher 15% figure, given how little they pay out now and how they earnings growth gives them room to boost it.  It's a hell of a lot better to get my paycheck as a shareholder than it was as an employee :-)

 

True that buybacks aren't your cup of tea but at these prices the buybacks are juicing EPS growth nicely... and EPS growth is what is helping fuel that dividend growth.

 

 

[Guest Bronco]

Let's be honest - all these companies are in the penalty box for not being apple or google.

 

How long that will last, I have no idea.  All these loser companies though are making tons of cash.  If you said they were all consumer staple companies they would probably shoot up 20%.

[ERICOPOLY]

People are yield starved, which is why REITS trade at dumb levels.  I wonder what a 100% FCF payout policy would do for MSFT stock.  I mean, 10% yield at these prices.

[Guest Bronco]

stock up 30% - 50%

[Eric50]

Re GOOG, I'd worry about the spending. It does not seem to be under control: SG&A rose 39% in Q4 QoQ while revenue grew 15%. They increased salaries by 10% across the board earlier this year. I'd be careful with that one.

[collegeinvestor]

Wal mart looks good. JNJ looks cheap. I don't understand microsoft--or tech. I just don't see a catalyst for microsoft....

[ERICOPOLY]

stock up 30% - 50%

 

I'll vote my proxy for putting Bronco in charge of the Microsoft board.

 

I put 1/7 of my portfolio into HPQ today.  They are buying back 10% of shares a year now and are the cheapest of all of them (my impression).  That will make EPS growth exciting.

 

My father worked at HP as an IC design engineer for 33 years since the 1960s and eventually retiring from Agilent (HP spinoff).  One of the lifers.  One of his HP buddies that we'd have Easter with every year when I was a little boy is Charlie Trimble (founder of Trimble Navigation after HP didn't want to fund his GPS project).  Very clever man -- did all that despite being legally blind.

 

So my Dad's been holding onto his HP stock all these years, refusing to sell.  Licking his wounds the past 10 years.  I told him today that I finally bought it for the first time -- this is going to piss him off when it quickly doubles in the next 3 years.

[txlaw]

People are yield starved, which is why REITS trade at dumb levels. 

 

Not all REITs are stupidly valued. 

 

FUR is trading at a reasonable price. 

 

CXS, which is managed by Annaly, is arguably trading at stupid cheap levels.  In fact, before the recent equity offering, Starwood Property Trust offered to buy up all the common at $14 per share.

[ERICOPOLY]

I realize that there are exceptions.  I like ROIC as well.

 

I am referring the broader REIT market where it's at 5% yield, seemingly only because it's a low interest rate environment.  If REIT didn't have a mandate to pay out nearly all of their earnings then I think they'd reduce their payouts and their shares would fall as the yield hungry pigs would look elsewhere.

[txlaw]

Re GOOG, I'd worry about the spending. It does not seem to be under control: SG&A rose 39% in Q4 QoQ while revenue grew 15%. They increased salaries by 10% across the board earlier this year. I'd be careful with that one.

 

I wouldn't worry about the spending.

 

The 10% salary increase was expected and the additional SG&A is growth related.  GOOG management really cares about ROI when it comes to growth-related spending, contrary to popular belief on the Street.

 

In fact, across the board, there are many tech companies that are increasing their growth opex and capex because they're generating so much cash and because they see so many opportunities.  GOOG, INTC, AMZN, DELL.  Even OSTK had a big bump up in "tech" spending.

[txlaw]

I realize that there are exceptions.  I like ROIC as well.

 

I am referring the broader REIT market where it's at 5% yield, seemingly only because it's a low interest rate environment.  If REIT didn't have a mandate to pay out nearly all of their earnings then I think they'd reduce their payouts and their shares would fall as the yield hungry pigs would look elsewhere.

 

I know you realize that. 

 

I just thought I'd use your post as a jumping off point to contribute a couple ideas, since Bronco has been bitching and moaning about not getting enough good ideas from the board.

[Guest VAL9000]

This is a well balanced (and brief) analysis of Microsoft's challenges as well as its realities.  Windows is probably going to concede OS market share over time, but how much that really matters needs to be put into perspective:

 

http://online.wsj.com/article/SB10001424052748703655404576293303706505770.html

 

I really tried hard to avoid tech over the past few years, but based on where valuations are today I might have to load up on some of the names mentioned in this thread.  There's a lot to like about Mister Softee...  (So much so that I might have to redact my earlier statement that MSFT can "suck it".)

 

[hyten1]

someone mention catalyst for msft

 

i think there are some potential catalyst

 

- windows phone show momentum

- windows 8 puts msft on the tablet track

 

hy

[T-bone1]

I realize that there are exceptions.  I like ROIC as well.

 

I am referring the broader REIT market where it's at 5% yield, seemingly only because it's a low interest rate environment.  If REIT didn't have a mandate to pay out nearly all of their earnings then I think they'd reduce their payouts and their shares would fall as the yield hungry pigs would look elsewhere.

 

I agree Eric, I've been buying LEAPS on FTR for that reason . . .  I particularly like that the high dividend yield makes the LEAPS cheap.

[prunes]

-emerging markets penetration, reduced piracy

-monetization of bing (currently a $2 billion drag on earnings)

-the anti-trust settlement with the US Govt ends in May

 

Another possible idea would be to consider potential spinoffs, although I don't have any specific ideas in mind. MSFT is large enough that it is difficult to manage effectively.

 

[Guest VAL9000]

- successful migration of legacy software sales to subscription sales.  Credit Bronco for getting me thinking about this more (cloud apps that is).  Microsoft has a bunch of products that would translate well to a subscription model vs. a traditional licensing model:  Dynamics ERP, Dynamics CRM, SharePoint, Exchange, SQL Server, Office...  Companies like SalesForce and NetSuite are awarded 8-10x revenue multiples, whereas Microsoft gets about 4x.

 

[prunes]

I think the ending of the anti-trust settlement is being completely discounted by the market. Think about the potential, with its preexisiting user base, if MSFT wanted to compete against NFLX, the iTunes store, etc. MSFT has been afraid of throwing its weight around.

[ERICOPOLY]

I think the ending of the anti-trust settlement is being completely discounted by the market. Think about the potential, with its preexisiting user base, if MSFT wanted to compete against NFLX, the iTunes store, etc. MSFT has been afraid of throwing its weight around.

 

Bare knuckle punches hurt more.

[ERICOPOLY]

Here is why I bought the JNJ 2013 near-the-money calls.  It provides a cheap entry point in 2013.

 

Go back to early 2009 in our big crash -- stock got down to about $47.  Okay, now grow it by 7% annually for 4 years.  That takes you to $61.  So the $60 strike 2013 calls allow you to make a 10% down payment today for a 2013 purchase at a mere 10% premium to the 2009 bottom.  

 

$61 in 2013 is the same as $47 in 2009.

 

Just planning ahead  :)

 

Is 7% annually a reasonable rate of value growth for JNJ?  I'm expecting it to be in the 11x forward earnings range by the time I buy it.  At any rate, HWIC bought theirs at about $60 in early 2007.  I'll be paying a 10% premium to their price -- but six years after the fact!

[Parsad]

I just thought I'd use your post as a jumping off point to contribute a couple ideas, since Bronco has been bitching and moaning about not getting enough good ideas from the board.

 

When is Bronco not bitching and moaning about not having enough ideas?  The guy must have a portfolio as thick as the Magellan Fund!  ;D  Just buy an ETF Bronco and get it over with.  Cheers!