Post a CommentTime for a new trade and I had a rather difficult time this weekend settling on the trade to open but in the end, one of the companies that I’d like to buy right now is Microsoft and the more obvious short was going to be a low growth company so I think I found one:) Things continue to go well with my picks and as you might have seen, I did end up closing one such pick on Thursday!
As will be the case all year, my long & short stock picks will be available to see in my live spreadsheet:
http://www.intelligentspeculator.net/livetrades
You can see the numbers for both companies involved in today’s trade here:
| Ticker | Name | Price | PE Ratio | PE Next Year | Return YTD | Sales Growth | Analyst rating | Book Value | Beta | Revenue/Share | Sales 5Y Avg Growth | EPS 5Y Avg Growth | Sales 5Y Avg Growth | EPS 5Y Avg Growth |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| MSFT | Microsoft Corp | 37.9 | 13.42 | 13.06 | 2.74 | 5.6 | 3.58 | 10.25 | 0.9 | 9.3 | 8.19 | 13 | 8.19 | 13 |
| AOL | AOL Inc | 44.04 | 24.58 | 16.82 | -4.44 | 5.85 | 3.9 | 28.62 | 0.58 | 29.9 | N/A | N/A | N/A | N/A |
Interesting chart that I always bring up, quarterly revenues growth which always tells an interesting story. In this case, the story actually looks much better for AOL. The immediate question is how sustainable that growth is.
MSFT Revenue (Quarterly YoY Growth) data by YCharts
Long Microsoft Corp (MSFT)
Microsoft is certainly trying things and trying to become a different type of company. Not that it really had a choice. It’ll be a challenging road ahead to thrive in a new mobile world with competition from the likes of Google and Apple but I do think that they have many pieces in place (xBox, clearer Nokia strategy) and the early sign in regards to newly appointed CEO Satya Nadella are certainly positive. I’m not sure we can expect the Nadella impact to be as big as the Marissa Mayer impact but it should certainly be seen as a very positive sign that Microsoft will have clear goals to work towards.
Next earnings release: April 24th 2014
Short AOL Inc (AOL)
AOL has certainly been a very different company under Tim Armstrong and some moves have certainly proved brilliant (Huffington Post comes to mind) while others (Patch) have been failures. AOL has certainly been fighting its way back to internet relevance with so many others including Yahoo but it does seem have a very long way ahead. Producing mass content through sites such as HuffPo, AOL and TechCrunch is a fairly low margin business that is incredibly competitive. I don’t think AOL is a poorly run company but I do think the growth will be very minimal for many more years which makes it a good short in this trade.
Next earnings release: May 8th 2014
Disclaimer: No positions on Microsoft (MSFT) or AOL (AOL) but I will initiate the trade on the open today
