When you're a $231 billion software giant, it's no surprise that you generate plenty of retail and institutional interest. Nonetheless, I was surprised to find out that last year, Microsoft
Turns out the view is somewhat bullish. Let's have a look at a few of the key sentiment drivers.
1. Analyst opinion
Analysts are mostly bullish on Microsoft. Data from Yahoo! Finance captures their collective feeling:
|
Sentiment |
# of Analysts |
|---|---|
| Strong Buy | 15 |
| Buy | 9 |
| Hold | 10 |
| Sell | 1 |
| Strong Sell | 0 |
Fifteen analysts have a "strong buy" rating, with an additional nine "buys," compared with 10 "holds" and a lone "sell" rating. For purposes of this exercise, we'll classify analyst opinion as largely bullish.
2. Insider buying
The insider buy/sell picture is decidedly less rosy. Over the past year, Microsoft insiders have sold $4.5 billion worth of their company stock. During the same time period, insiders didn't buy a single share of stock. (Data from Form4Oracle.)
Although insiders sell stock for a whole host of reasons -- to pay for a house or tuition, to diversify assets, and so forth -- it'd be nice to see some buying to offset all that selling. We'll classify this trend as bearish.
3. Guru buying
Next, we'll look at "guru" ownership of the stock. According to GuruFocus, investing gurus are bullish on Microsoft. In the quarter ended Dec. 31, Don Yacktman and Richard Aster bought shares. In the quarter ended Sept. 30, Yacktman was also a buyer, along with Whitney Tilson, John Hussman, Jean-Marie Eveillard, Bill Nygren, and Tom Gayner. The lone seller was Ron Muhlenkamp.
Microsoft has been added to multiple guru portfolios in recent months, so we'll call the guru trend bullish.
4. Retail-investor community sentiment
For retail-investor community sentiment, I turn to Motley Fool CAPS, our proprietary stock-rating system. CAPS generates ratings on a one- to five-star scale, with five stars as the highest ranking, indicating that the Fool community believes in a stock's future. Microsoft has a middle-of-the-pack three-star rating.
5. Short-sellers
Next we'll look at whether short-sellers are circling the stock. There are 76.3 million Microsoft shares sold short, according to Capital IQ. As a percentage of shares outstanding, that's a short interest of 0.9%. That's not very high -- struggling operator Barnes & Noble has a short interest of 13.5% right now, for example -- and so for determining sentiment, we'll take this as a good sign.
6. Does Buffett own it?
This is the "cherry on top" test, and in Microsoft's case, it's a no: Berkshire Hathaway does not own shares. This isn't much of a surprise, though -- Buffett is famously shy about his understanding of technology companies, despite his friendship with Microsoft founder Bill Gates, who even serves on Berkshire's board.
Adding it up
Microsoft is liked by analysts and gurus, and short-sellers aren't betting against the stock in a significant way. On the flip side, insiders are net sellers -- it's not even close -- and the CAPS community is neutral on the stock. Microsoft also doesn't pass our final test -- Buffett's possible ownership. Add it all up, and Microsoft comes out with a "somewhat bullish" consensus sentiment.
Of course, you can't base an investment philosophy on who likes the stock you like, and a consensus opinion can sometimes be a scary thing. Quoting Buffett: "A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful." There doesn't seem to be a sense of either fear or greed circling Microsoft right now, though.
The purpose of this series of articles isn't to make a definitive buy-or-sell call on Microsoft. Rather, by looking at a stock's sentiment, the goal is to help you place your own opinion of it in a broader context.
One final thing: If you want to keep tabs on Microsoft's movements, and if you want more analysis on Microsoft, make sure you add it to your Watchlist.
