Undervalued Leaders From Jeremy Grantham To Buy - Will You Let Them Pass By?

May 24, 2012 5:54 PM ETJNJ, PFE, KO, PM, WMT, GOOG, MSFT2 Comments
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FAF Research

From an individual investor's perspective, I find it truly interesting to focus on stocks that are large holdings in Jeremy Grantham's portfolio. I analyzed them and found some reasons why Jeremy Grantham could have been attracted to these investments. I look for companies that I can understand, with favorable long-term prospects that are operated by competent people, and, importantly, are available at attractive prices. I used whalewisdom.com to check Jeremy Grantham's holdings.

Microsoft (MSFT)

What is amazing about Microsoft is that the stock has been seen as "dead money" and "value trap" over the past few years, but I think that the tides are changing and that could take MSFT to a more normalized valuation above $32. Basically, Microsoft has plenty of legs remaining in several of its products (Office 2010, Windows 7, Kinect, etc.), has one of the most promising product cycles (Windows 8, Windows 8 Server, Office 12, etc.) in its history in front of it, and is levered to numerous secular trends (cloud computing, virtualization, big data, etc.), which should enable the company to outpace IT spending and outperform its peers for the foreseeable future.

I think that the recent Nook deal will position MSFT as a potential competitor to Amazon's (AMZN) Kindle and Apple's (AAPL) iPad. Argus research recently issued a report that while the deal, announced on April 30, is a small one for MSFT, they view it as an option on a potential competitor to AMZN/AAPL in the e-reader/tablet market. One significant benefit for Microsoft will be the embedding of a Nook e-reader application within Windows 8.

I like the fact that management, in the recent conference call explained that MSFT is the only company that can deliver a common identity, virtualization, management and development platform to its customers across both private and public clouds. Management also highlighted

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5 Year Buy-Side Experience, MBA Columbia University

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