In fact, Microsoft’s balance sheet has over $22.7 billion in short-term investments listed in the most recent 10-Q. For the most part, those short-term investments are the equivalent of cash since they are primarily invested in fixed income securities that are investment grade and easily sold for cash. Taking these short-term investments into consideration, I really should have determined that net cash for Microsoft is currently $31.8 billion.
Using $31.8 billion in cash instead of $9.1 billion, my intrinsic value estimate rises to $27.39 per share versus my initial estimate of $25. I knew something was amiss with my original estimate, but I did not see the omission until I received the comment about net cash.
[Receiving comments on one’s investment analysis is one of the great benefits of posting research online for other to review and provide comment. I’m amazed at how often I receive insightful comments on my posts. Just look at the great discussion occurring on my original Microsoft Price Watch post. This is also one of the reason why I have shared my Fat Pitch Finder Spreadsheet.]
Full Disclosure: I own shares of Microsoft.
MSFT 1-yr chart: