In an interview earlier this year, I got in a soft argument about Microsoft (NASDAQ:MSFT) and whether or not it was a 'great stock'. Mind you, the interviewer was a large cap growth manager (and seemed to be a pretty nice guy). He set me off a bit when he stated that it was a great stock because it had 85% gross margins, and traded at 13x free cash flow. The real number was 18x, I believe, but I digress.
The point is that in the past year or two, there has been glowing optimism towards MSFT. Seemingly every fund on the planet already owned it. It could do no wrong. It is creating cash like crazy, and like I mentioned before, the margins are great. The business moat is incredibly wide. It is truly a great business.
But during that interview in December, I disagreed with the man on the other side of the table because in my mind, what wasn't already known? The market expects Microsoft to have those margins and great cash flow. It expects the monopoly that it has in the operating system world. In my mind, what upside did MSFT have? Furthermore, who was left to buy it to push the stock higher?
Enter the sellers. Now, suddenly, the media and masses have begun to poo-poo MSFT. The negativity might finally force the expectations lower for Microsoft lower. Please, Mr. Market, keep doing it.
I used to 'hate' MSFT stock - as recent as a month ago. But now that others are starting to hate it, maybe it's not so bad?
MSFT 1-yr chart: