Sunday, November 18, 2012

"Time to grab some Total Return with an investment in Microsoft at $26.50"

Dow Jones Industrial Average 12,588.31 (DOWN) Week ending 11-16-2012

"And you can fly, High as a kite if you want to,
Faster than light if you want to,
Speeding through the universe,
Thinking is the best way to travel"

Moody Blues ... The best way to travel

Isn't it amazing that you can move in your mind from one end of the investment universe at speculation to the far other end at very conservative in your investment thinking.  You just need to think about it. So, this week, I move back to the airspace of the very conservative stocks and will talk about a products we use everyday and don't think about much, from Microsoft Inc. Thank you to the Moody Blues for running that song through my  head , "The Best Way to Travel". (some lyrics above)

Microsoft Corp. (Symbol MSFT, $26.52) is a company that sits as we speak, with 66.6 billion dollars in cash on their balance sheet. I believe that with the tax rates changing next year here in the USA, that Microsoft may make one of those "one time" special  dividend payments. 

  So what I am looking for here is a possible special dividend, to go along with the regular dividend of 3.47%, plus the stock moving up to the $31-$32 dollar range with the new introduction of the Windows 8 operating system. You get a lot of chances for success here with this stock,  to accumulate a nice 25-30% total return.

MSFT has a PEG ratio of 0.85% and a Return on Equity of 23.99% so it fits my investment criteria parameters. 2013 earnings per share are looking like $2.92 per share and 2014 earnings of $3.25 per share. 

The company has a great balance sheet but only has 5 year sales growth of 4.39%.  Hopefully with Windows 8 we get a little more growth. Also Microsoft should take some of that cash and invest it with his friend Warren Buffett and buy some Berkshire Hathaway shares and let him invest it. Warren is just going to give his money back eventually to the Bill and Melinda Gates Foundation anyway!

This company did almost 74 Billion dollars in revenue last year so there is really only the risk here that nothing miraculous happens.  At some point though, someone in this company is going to start investing that money and start buying some small high technology companies and then you will get some nice earnings growth going again.

Short and sweet and now back to watching the football game.

Have a Happy Thanksgiving Day. Eat some Turkey.


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