To The Moon

Santa, please give me Microsoft

If I am only allowed to choose 1 stock as my X’mas gift (though I hope Santa would be mor generous), I would go for $Microsoft(MSFT)$ . Yes, it may sound boring, but Microsoft is undoubtedly the leading tech company with one of the strongest economic moat and fundamentals globally. What beats having a stock that can weather you through the roughest of all storms yet gives you the growth and returns in an economic recovery?

Firstly, Microsoft’s Intelligent Cloud, otherwise commonly referred to as Azure, has grown to become the largest revenue driver and poised to grow at least 20% year over year. While companies may be controlling their expenses on cloud services in anticipation of a recession next year, the prospects of the cloud services industry remain favourable as it is a crucial component for digital transformation.

Next, its Productivity and Business Processes continue to be robust with its Office products (which remain indispensable for most companies) and the continuous improvement in its Microsoft Dynamics enterprise applications (used by many MNCs such as Coca Cola). While there might be headwinds due to slowing macroeconomic growth, this segment will prove to be rather resilient as these enterprise tools are rather demand inelastic due to their criticality in running day to day operations. However, we may see slowing growth as companies become more prudent in expanding into additional services or new companies adopting Microsoft’s applications.

Another notable segment is none other than its Personal Computing segment, particularly the X-Box. Microsoft’s share in the gaming market has grown leaps and bounds as its X-Box console and games rose rapidly in popularity over the last 5-10 years. With the gaming industry forecasted to grow at about 13% CAGR, Microsoft will only stand to benefit from this trend in the long term. This does not account for the acquisition of Activision Blizzard which if successfully completed, will only further cements Microsoft’s leadership position in the gaming industry. 

I am also a personal user of the Microsoft Surface Pro laptop (also part of Personal Computing), which works perfectly as a traditional laptop and even better as a tablet. Its refined and professional looks is a strong alternative to the much pricier Apple MacBook for the same tech specifications. 

Microsoft’s strong balance sheet of over $100 billion in cash and short-term investments is akin to a impenetrable fortress. Coupled this with a strong operating cash flow of over $89 billion, Microsoft will continue to be a dominant tech company that will thrive even in a recessionary environment. Definitely a great long-term investment to hold [Grin] 

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