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Marty Chilberg's  Instablog

Marty Chilberg
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I'm a retired CPA who spent the majority of his working career in technology companies. My work included management stints at Atari Inc, Daisy Systems Corp, Symantec Corp and Visio Corp. My last position at Visio (VSIO) was as CFO and VP Finance and Operations.
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  • Telecommunication Systems, Inc Infrequently Asked Questions

    I'm currently in the prep stage for an interview with Jay Whitehurst next week. My article will be focused on the numerous products and services in the Commercial Segment and how they may have morphed from work originally done in the Government sector. Any suggestions for questions can be left here in the comments section for consideration. Or reply to my tweet or at:

    Disclosure: The author is long TSYS.

    Dec 05 1:06 PM | Link | Comment!
  • Earnings Season Q3-2014

    The earnings season window is just about over and, all things considered, it was a pretty solid quarter of continued modest top line growth and better earnings through productivity gains and buybacks. This formula has been a solid elixir for the market, balancing earnings growth with minimal inflation.

    FactSet data summary for quarter

    • 462 companies (92%) of S&P 500 have reported results.
    • EPS earnings reported above consensus 77% (above average).
    • Revenue reported above consensus 59% (at historical average).
    • Q3-14 earnings growth for group at 7.9% (expectation was 4.4%).
    • Q3-14 group revenue growth 4.0% YY (expectation 3.8%).
    • Forward guidance lowered for 62 companies.
    • Forward guidance raised for 19 companies.
    Nov 17 12:09 PM | Link | Comment!
  • Microsoft: The Valuation Gurus Still Have It Wrong

    I've been amazed how many bloggers and analysts weigh in on the valuation metrics for Microsoft (NASDAQ:MSFT) from a perspective that seems to be dated. MSFT has not been a growth company for about 20 years, yet back in the bubble years, it had a growth multiple of over 60x forward earnings. (2000) For the ensuing decade, everyone wanted to blame management for price declines which were inevitable as it transitioned to a value investment. The market adjusted to more correctly value the company yet the vast majority of those that weighed in on the decline continued to point to price declines rather than multiple contraction in their assessments.

    Now MSFT has rallied to a multiple that is well above value range and the resulting consensus appears to be that they are now overvalued. In my opinion the opinion is again missing the boat. MSFT has morphed yet again into a yield play that should be more appropriately valued relative to a dividend growth company. Consider the universe of Dividend Champions, Challengers and Contenders when evaluating MSFT. The company has a forward multiple (F16) of 15.6x and a PEG ratio of 2.8. With a yield of 2.5% and a FCF payout ratio of about 33%, MSFT is well positioned in this space. A couple of random comps:

    • JNJ PE 17.4, PEG 2.8x, Yld 2.9%, FCF payout 55%
    • SO PE 16.3, PEG 5x, Yld 4.5%, FCF payout over 100%
    • MCD PE 17.2, PEG 3.6x, Yld 3.6%, FCF payout 75%

    I'll take my chances on MSFT for long term dividend safety and growth over any of these names. My fair value for MSFT as a dividend growth name is $50-$55 per share. The company has a momentum feel to it today so I'm going to be selling covered calls against my position in this range. If it stays below that level, I'm getting a bit of extra income. If it gets assigned, I'll let it go and wait for a re-entry opportunity.

    Disclosure: The author is long MSFT.

    Nov 17 11:37 AM | Link | Comment!
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