In my last article on Microsoft Corp. (MSFT) I presented clear warnings. Much news has transpired with the company in a short period of time. Major new-product announcements have been made apparently using all their guns. This hype is becoming similar to that of Apple's style of promoting business. I suggest Microsoft is a much different culture than Apple (AAPL). Saying it another way, it (the hype) won't work for MSFT.
This article is a three-minute read for your future of investing wisely in
MSFT. My goal is to provide you and clients with consistent annual profitability. If you would like more than this quick insight into my work you might want to begin by reading "My Methodology" in this article.
As for MSFT's "bullish (foreseeable) future," that too is as clear as can be. My valuation work is presenting warnings and concerns. Technically, Microsoft is not moving as would be expected with all the marketing efforts.
Investing for profit is all about future price per share. Clearly, I am long-term bullish on Microsoft, but I expect a shorter-term pull back. Therefore, I am issuing another bearish warning to be considered by shareholders.
Here is the table from my previous MSFT article with current supporting data:
Valuations for Microsoft, MSFT (Click here for a view of my 20-year chart)
Microsoft (June 12th.) | Microsoft (NOW) | |
Current Price: | $29.00 | $30.50 |
Target Price: (from the high) | plus 6% / minus 20+% | plus 6% / minus 20+% |
Trailing P/E | 10.7 | 11.1 |
Forward P/E (fye 12/31/13) | 9.6 | 9.9 |
PEG Ratio | 1.21 - - good | 1.12 - - good |
Price to Sales: | 3.38 - - not so good | 3.52 - - not so good |
Price to Book: | 3.59 - - not so good | 3.74 - - not so good |
Dividend (yield) | 2.73% | 2.62% |
ROI | 27.9% - - very good | 27.9% - - very good |
Valuation Divergence: | (minus) - 22% | (minus) - 23% |
Source: Raw data taken from Finviz.
Notes for the above table: Target price is calculated and produces a probable range of the current price over the coming one to three months. Valuation divergence is calculated and produces a plus or minus percent of price over the following one to three months after a given bullish or bearish inflection point.
Comments for the above table: These are not strong Valuations and Target Price Projections. When I do further fundamental studies, the valuation does not improve. Projected earnings growth for Microsoft will fall off for a couple years or more. Good technical and consensus opinion analysis suggests that Microsoft will continue to be a modest performer. Investing in Microsoft at this time, or even holding, is highly questionable.
Market Status
My general market opinion is that the fundamentals are over-valued; the technicals are over-bought, and the consensus opinion is way too bullish. I am currently a bear because my valuations are convincingly negative, and we are in a bearish cycle; it's just that simple!
Summary
Patience and discipline are more important than the above data, tables, charts and information. However, the focus is always the question: do I buy, sell or hold? My question for you is, do you have the patience and discipline to hold cash for a time? And, can you wait until you can be sure to profit?
My criterion for taking a bullish position is that the company must have the prospect within its fundamental valuation and technical charts to outperform the general market, its sector, and industry group.
Currently, the above tables and charts present notable warnings about these companies. It is a fact that, the stock market cycles endlessly both fundamentally and technically. It continuously moves from bullish cycle to bearish cycle and then back to bullish cycle again. Unfortunately, this is a pattern that is not well-understood or taken advantage of by most investors.
This analytic work I do each day is fun and profitable. There is always a list of the best (for buying) and worst (for shorting) companies to further valuate and study. Seeking profits by focusing on the best companies, or perhaps the worst companies is definitely a challenge. The companies between the best and the worst are never considered as a current investment. All companies rotate into favor and out of favor. Each company takes its turn, at being one of the best or perhaps one of the worst. To be consistently profitable, we must always be prepared with, up to date, lists of the best and the worst companies. This work must be complete, well ahead of the pending bullish or bearish market cycle.
Within this present bearish time frame, there is nothing (longer-term) wrong with Microsoft. This is an on-going process and what happens when companies turn bearish. It is also part of "cycling effect" and the way the stock market works.
I hope you like my methodology and will continue to follow my work / analytics. It won't be long before I can offer you a bullish and up-beat forecast once again.
Conclusion
I am currently bearish on both the world economies and the general market. My more recent Instablog postings are focused on securities that should not be currently held in your portfolio. I suggest that it is important for you to understand that holding cash is often a wise decision. During bearish cycles, this advice is always profitable for you. I can assure you that; this is definitely a "bearish cycle" time frame!
I can also assure you that I am longer-term bullish on all of these companies. Their bullish cycle will return again in the coming months. Currently, my "holding cash" advice is both prudent and investing wisely. Ongoing support for Microsoft's current status is updated each Saturday.
Have fun, invest wisely.
