I’m a computer programmer, and by new year I will have permanently switched away from Windows and onto Linux … at home, not at work, and I will occasionally switch into Windows to play Mass Effect 3. There’s nothing I like better than to bash Microsoft (MSFT).
The internet is a fantastic place, as it allows you to see what was said in yesteryear, and give you some perspective on what was thought relevant then. I wrote recently (although mysteriously, I cannot find the post) that an experiment in crowd-sourcing for 2012 investment ideas produced a portfolio that slightly underperformed the S&P 500. MSFT was one of the member of the portfolio. Actually, the write-up wasn’t bad, and basically said that MSFT was a cash-rich high-return reasonably-priced Magical Formula stock.
Stock markets always seem to outfox everyone, and whilst the idea was straightforward and actually perfectly fine, it nevertheless underperformed the market significantly.
But wait. There’s an even more interesting tidbit to be gleaned. On 18-Jan-2011, an article appeared on Seeking Alpha entitled “Microsoft is Cheap: Prove me wrong”. It mentioned that it was a top holding of Thirney Tilson, David Einhorn, and others, and then went into the whole spiel about monopoly-like market share, and so on. If you had bought on the basis of this, you’d be down 5.4%, compared with up 12.5% for the Dow (approximately). What really caught my eye was a user comment by the name of “iphone rules”
Cheap stocks remain cheap. Microsoft is like a stock in a 99 cent store. You know what happens to those cheapo stocks. They dont go above 99 cents.
$30 is Microsoft’s 99 cents. End of story. No further analysis needed.
MSFT currently stands at $27.06. And that, my friends, is what Investing Genius looks like.