Microsoft Has Suddenly Become a Market Darling

The Dow Jones Industrial Average is down big today, but Microsoft is holding up well, something it's been doing for well over a year.

Apr 25, 2014 at 3:30PM

The sell-off picked up fast and furious today on Wall Street today, in part because tensions are escalating again between Ukraine and Russia. Ukrainian forces are moving in on pro-Russian separatists and Russian troops across the boarder have been activated.

Stocks fall on news like this because traders don't want to go into a weekend with too much exposure to the market, so they'll sell off positions on Friday. Big political or economic news often occurs during the weekend, so that's why Fridays are such a big deal. At the end of the day, tensions between Ukraine and Russia should be expected and I'd look at this as a short-term buying opportunity.

The Dow Jones Industrial Average (DJINDICES:^DJI) tumbled 0.8% as a result of today's sell-off, with 21 of 30 components in the red in late trading.

Microsoft becomes the market's darling
It wasn't long ago that Microsoft (NASDAQ:MSFT) was one of the Dow's laggards, but it's suddenly become an outperformer, doubling the index's gains over the past year.

MSFT Total Return Price Chart

MSFT Total Return Price data by YCharts.

Just the fact that Microsoft is up slightly today is impressive following the company's first-quarter results. Revenue was down slightly to $20.4 billion and earnings per share fell $0.04 to $0.68.  

Msft Xbox One Image

Xbox One is now a considerable contributor to Microsoft's results.

But if you adjust for revenue deferrals and the Windows upgrade offer, revenue on a non-generally accepted accounting principles basis was up 8% and earnings per share were up 5%. The biggest positive came from the devices and consumer hardware unit, which is a big focus of new CEO Satya Nadella. Office 365 Home now has 4.4 million subscribers and added 1 million in the quarter, which also saw 2 million Xbox consoles sold and Surface tablet revenue rise 50%.

When you combine those results with today's close of the $7.5 billion acquisition of Nokia's handset business, Microsoft has momentum on its side.

It also doesn't hurt that the market is starting to put more value in companies that have consistent earnings. Microsoft has exactly that history. I don't know that Microsoft will outperform the Dow over the next year, but the consistent growth of its business overall shows the company isn't the dog that some wrote it off as just a year ago. It's still a power in tech and that's driving the stock in 2014.

Who can control the future of the living room
The cable industry is under fire and companies like Microsoft are trying to become the future of the living room. If it can, there's $2.2 trillion out there to be had. Currently, cable grabs a big piece of it, but that won't last. And when cable falters, three companies are poised to benefit. Click here for their names. Hint: They're not Netflix, Google, and Apple. 


Travis Hoium has no position in any stocks mentioned. The Motley Fool owns shares of Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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