Robert Way
Microsoft (NASDAQ:MSFT)'s stock price has really rallied in the last few weeks, to a point where I wanted to reassess if this is still a compelling opportunity.
The tech giant was already trading at notable valuations coming
Microsoft: Cloud Pointing To Market Cap Convergence With Alphabet
Summary
- Google Cloud is growing faster than Microsoft Cloud, maintaining a 28% CAGR versus Microsoft's slowing 22% growth.
- Google's legacy advertising business is nearly twice the size of Microsoft's legacy segment and is growing at the same 10% rate.
- The market undervalues Google's future potential, especially as its cloud and subscription revenues accelerate and rival Microsoft's scale.
- My model below demonstrates an interesting conclusion on both companies' future market capitalizations.
I only buy strong businesses. I only buy them when they're cheap. Backgrounds in economics, philosophy, government, data. I started my investing journey with a fairly concentrated portfolio of Canadian dividend payers in the telecom, pipeline and banking industries. I have moved forward through different industries including payments, US regional banking, Chinese and Brazilian equities, REITs, technology companies and a few other emerging market opportunities, as well as microcap through to megacap range. I currently am focused on holding the highest quality businesses and continuing to expand my knowledge of their advantages. I think there is a lot one can learn listening to Warren Buffett, Charlie Munger, Monish Pabrai, Terry Smith, Li Lu, Bill Ackman, Guy Spier and perhaps most importantly, the CEOs: Jensen Huang, Mark Zuckerberg, Jeff Bezos and others.I am mostly focused on big tech companies with billions of users and expanding libraries of content. I think the possibilities of cross-selling when you have such large bases are underappreciated. I prefer to value companies at the EBIT+R&D level because of the potential in certain R&D investments I believe in. I have no professional affiliations. My annual return from February 2019 to October 2024 was 11.4% CAGR (a 1.82x), somewhat underperforming the market's 15.18% CAGR (a 2x). But I believe my expanded knowledge since 2019, especially in the last few years, has provided me with the tools required to outperform the market into the future. I believe the principles I have learned will keep portfolio turnover to a minimum going forward and that most of the money to be made will be made not selling the companies I already own.Finally, I don't believe in "Buy" and "Sell" recommendations. We have a selection of 50,000 stocks worldwide, all with varying prices. If your focus is total return, and you are looking for truly exceptional businesses at more than fair prices, then the threshold for allocating capital should only be titled "Strong Buy", with everything else a "Strong Sell" to generate cash for the next "Strong Buy". I will initiate a "Hold" on some of these great businesses if the pricing isn't favorable.
Analyst’s Disclosure:I/we have a beneficial long position in the shares of GOOGL either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
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