Tuesday, June 16, 2009

Everyone loves Microsoft

AlphaNinja - Much love for MSFT lately. Their new search engine, Bing, has quietly surprised people, and boosted MSFT's search share 3% in its first 10 days. Also, there are rumors that Windows 7 will be a vast improvement over Vista - many customers skipped Vista altogether, suggesting that a robust upgrade cycle may be in store.

6/13 - Multiple MSFT mentions in Barrons roundtable discussion. Fred Hickey called it "the best play in the tech world right now. It trades for 12 times earnings, something you don't eveer see. The catalyst for the stock is Microsoft's biggest upgrade cycle ever."

Meryl Whitmer, owner of a fantastic track record, said "net of cash, it's trading at 10 times earnings...it could surprise on the upside, as corporations didn't upgrade en masse to Vista...shopping on Bing is great because of a cash-back rewards program."

6/15 -> NYPost reports that Google founder Sergey Brin has assembled a top team of engineers to updade their algorithm, as Bing has spooked the company.

6/16 -> Jeffries ups MSFT target to $26 on what they see as a large upgrade cycle

I wrote positively about MSFT a while back when its 2010 free cash flow yield looked to be about 11%. With the run in the stock price that yield now looks to be 7-9% depending on one's assumptions ->>>> with this stock's ultra-low cost of capital, pristine balance sheet and huge cash flow generation (not to mention "reliable cash generation") the stock should yield only 5-6%, sending shares higher.

(Disclosure - long MSFT)

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