Is it Time to Buy Microsoft? (msft, orcl, aapl, intel, gs, goog)
Yesterday, we talked about bubbles and tech stocks. While it's possible to argue that certain sub-sectors of the Nasdaq may have some bubble-like valuations, technology blue chips are definitely not in bubble territory.
As I noted, the Nasdaq 100 (NDX), which is comprised of the 100 largest companies on the Nasdaq, is currently trading with a trailing P/E of 12.5, according to the Wall Street Journal.
And the reason the P/E is so low on the NDX is that the five most influential tech stocks -- Apple (Nasdaq:AAPL), Google (Nasdaq:GOOG), Intel (Nasdaq:INTC), Microsoft (Nasdaq:MSFT) and Oracle (Nasdaq:ORCL) -- all trade with forward P/E ratios of 13 or less.
Microsoft may be the cheapest of the group, with a forward P/E of 9. Of course, there is such a thing as too cheap. There's a reason Mr. Softy is trading at such a low valuation -- the company is widely seen as something of a dinosaur. It's missing out on tablets and the wireless device boom.
Its Windows mobile operating system has been in the works for nearly a decade and has no significant design wins. Cloud computing threatens to move word processing off the desktop, its search engine Bing is a flop, and it's failed to make interesting acquisitions like Yahoo! (Nasdaq:YHOO). The Skype purchase could be significant, if Microsoft can figure out what to do with the service.
*****Missing the tablet boom is especially ironic, because the tablet was a pet project of Bill Gates' from a decade ago. Gates toyed with tablets that would convert handwritten text using a stylus into digital text. The idea never took hold because the tablet is more for entertainment than work, something Apple's Steve Jobs understands.
The problem, according to some, is CEO Steve Ballmer. Hedge fund heavyweight David Einhorn, of Greenlight Capital, is vocally calling for the Microsoft Board of Directors to fire Ballmer and give someone (anyone) else a chance.
Einhorn owns around 9 million shares of Microsoft. And he clearly wants the share price to rise. And like other "activist" investors like Carl Icahn, he's trying to throw his weight around to prompt change.
I'm not sure it's possible to refute Einhorn's contention that Ballmer should go. After all, the list of Microsoft missteps is pretty long. His only real success so far as products go has been the XboX.
No doubt, Einhorn is very aware of what happened at Apple when visionary founder Steve Jobs came back. Would the return of Bill Gates make for a similar renaissance for Microsoft?
It's hard to see how it would hurt...
*****Microsoft has been doing better, financially speaking. Sales growth has improved and return on equity is up. And it beat earnings estimates by $0.05 a share for the first quarter.
It could be a good time to pick up some Microsoft shares.
*****As investors, we should be cheering for higher oil prices. The correlation between oil and stock prices is pretty much ironclad. Expectations for expanding growth mean oil prices and stock prices rise.
It’s as simple as that.
Oil stocks have been hit pretty hard over the last month or so. But the long-term fundamentals for oil prices haven't changed. In fact, the fundamentals imply higher prices, as Goldman Sachs (NYSE:GS) observed earlier this week when it raised its price forecasts.
This could be an excellent entry point for the exploration companies working the Bakken oil pool in the Western United States. One of my favorite Bakken plays is down over 30% from recent highs. And it's showing signs that the selling os over and it's ready to move higher. You can learn more about my favorite Bakken oil plays HERE.
