You are right that Microsoft has other businesses that are not subject to the pressures I discussed. They may do very well with their gaming division for all I know. But the profits from that segment are a fraction of the profits from Windows and Office, so to keep the article short and sweet I left that discussion out of it.
It very well could have been undervalued to begin with (and I believe it was). My point, however, is that since I bought it, two things have made it *less* attractive, one of them being price appreciation with no commensurate increase in value.
I agree that normalized P/E is more meaningful. But the assumptions characterizing what gets included into it is also more subjective, so I didn't get into it because it would have made for a longer and less-focused article. My assumptions for Microsoft's normalized earnings appear to be more conservative than yours.
Also, I don't take the cash at face value. Most of it is stuck overseas and is subject to a repatriation tax rate before it can be returned to shareholders. Again for simplicity I did not get into that in this particular article.
The problem is that tablets are improving their capabilities without requiring a Microsoft OS. The risk is that if that continues, no switch to Windows will be necessary, and PCs will therefore be displaced into smaller and smaller markets. You are right though that it will take a while for the story to play out. Meanwhile, Microsoft will continue to take in profits.
Telefonica Very Attractive After Dividend Cut [View article]
One investment does not preclude the other. To reduce risk (made all the important by the fact that both of these companies, particularly Citi, have large amounts of debt), diversify!
Telefonica Very Attractive After Dividend Cut [View article]
How does that change anything? Your proportion of the company does not change if everybody receives a stock dividend. The fees only serve to benefit the lawyers and exchanges etc, paid out with funds that would otherwise belong to shareholders
Regarding the issue of whether net income is real, note that free cash flow has been larger than net income, and the company has deployed a significant amount of this capital towards dividends, buybacks and debt repayments in the last two years.
I agree with you, I'd much rather see a focus on priorities in the order you listed, particularly with prices at these levels. It is only confidence in the strength of this business model that allows me to invest in such a heavily indebted company. To that end, it reminds me a bit of investing in Supervalu (http://bit.ly/InOOGE)
It's hard for me to say, because that depends on how big a component TEF already takes up in your portfolio, and also how long your investment horizon is. If the money is intended for the long-term and you are already well diversified, I would say yes, but remember that there are risks with investing, including some of the company-specific risks that are discussed in the article.
Dialed In To France Telecom [View article]
Why I'm Selling Microsoft [View article]
Why I'm Selling Microsoft [View article]
Why I'm Selling Microsoft [View article]
Also, I don't take the cash at face value. Most of it is stuck overseas and is subject to a repatriation tax rate before it can be returned to shareholders. Again for simplicity I did not get into that in this particular article.
Why I'm Selling Microsoft [View article]
Dominant and Cheap: Cisco Systems [View article]
Buy Staples On Dip [View article]
Telefonica Very Attractive After Dividend Cut [View article]
Telefonica Very Attractive After Dividend Cut [View article]
Telefonica Very Attractive After Dividend Cut [View article]
I'm not saying this is the bottom; I don't think the bottom can actually be predicted. Instead, I suggest this is a low price with a margin of safety.
Xerox Has Long-Term Value [View article]
Thanks for your insight as a customer.
Regarding the issue of whether net income is real, note that free cash flow has been larger than net income, and the company has deployed a significant amount of this capital towards dividends, buybacks and debt repayments in the last two years.
Telefonica A Long-Term Buy [View article]
I agree with you, I'd much rather see a focus on priorities in the order you listed, particularly with prices at these levels. It is only confidence in the strength of this business model that allows me to invest in such a heavily indebted company. To that end, it reminds me a bit of investing in Supervalu (http://bit.ly/InOOGE)
Telefonica A Long-Term Buy [View article]
About 54% of their OIBDA (they call it) comes from Latin America, vs 46% in Europe
Telefonica A Long-Term Buy [View article]
Telefonica A Long-Term Buy [View article]
It's hard for me to say, because that depends on how big a component TEF already takes up in your portfolio, and also how long your investment horizon is. If the money is intended for the long-term and you are already well diversified, I would say yes, but remember that there are risks with investing, including some of the company-specific risks that are discussed in the article.