5 Reasons Why I’m Gonna Keep Buying These Stock

And make the boring long-term journey as Warren Buffet did

I have some friends that don´t even want to talk about stocks. They rather bought stocks from commercial banks and lost money. Or had their fathers telling them that the stock market is where everyone loses their fortune.

But they never read anything about the stock market. They just see the opening news with more blood when the market goes heavily down. It´s what the news services do. They just notice the bad stuff.

They hear about Warren Buffett but never hear about Berkshire Hathaway and their story. It´s just an old man who had lucky with some stocks. They don´t know how he did it and how it worked for him.

Of course, there is an intrinsic risk when you buy stocks. You can always put your money in a saving account and wait, and wait, and wait.

Or you can make the homework. Read about the subject. Learn how the best did and start investing with your risk aversion mode on.

Investing in stocks it´s like having a degree in psychology. It´s about people, as Howard Marks said:

There’s no such thing as a market…All there is, is people. And people have feelings. And so the emotions tend to get people to buy, buy, buy at the top, until the last potential buyer has bought and spent all his money — at which point the top is reached and the second derivative goes negative — and sell, sell, sell at the bottom, until the last person who’s going to panic out does so.

Seems simple, right?

It´s not. And especially if that´s your money that is at stake. Were is where the psychology enters. It´s too emotional. And if you don´t control your emotions with the stock markets, then you shouldn´t be in the stock markets.

The stock market is a device for transferring the money from the impatient to the patient

I read about all of the gurus: Warren Buffett, Howard Marks, Peter Lynch, Paul Tudor Jones, Jack Bogle, Ray Dalio, and so on.

All of them say the same. You have to have patience. Investing in stocks is a long journey.

You can´t make a fortune in the stock market in a few years unless you are a kamikaze and try to go for the home run. But if you do that, prepare yourself to lose it all. Or you really have to design a simple strategy and stay with it for the long run.

There is no plan B.

Of course, when you have a tinny portfolio you should have a more risky strategy to boost your gains. But with the time passing by, you´ll need to have a strong and balanced portfolio to resist all the bad weather that always comes into your way.

That´s why I invest in Microsoft.

This company has been one of the most credible in the last years. And have all the things I like in a company. Diversification, low competition, excellent balance sheet, and a great leader (Satya Nadella).

Here are 5 reasons why I decided to invest in the long run in Microsoft.

1. Diversification

Microsoft is essentially a software company, most well known for its operating system Windows, and Microsoft Azure Cloud platform.

Windows control over 76% of the total desktop operating systems in the world. Even if you include cell phones and tablets, Windows comes right behind Android with 37.86% to 36,08% for Microsoft, wish is an impressive statistic.

The Year over Year growth adoption puts Azure in the leader position against the powerful competition. And better than that, enterprise SaaS market is generating $20 billion in quarterly revenues for software vendors, a number that is growing 32% a year. Microsoft has a worldwide market share of over 17% and is now the leading SaaS vendor by some distance.

Microsoft is also involved in a high growth market like data analytics, artificial intelligence with Azure Cognitive Services, Azure Machine Learning, and Azure Cosmos DataBase. These 3 areas are bringing more than $100 million dollars in revenue to the company.

Microsoft is also in the gaming market. This market is expected to reach $180 billion dollars of market share by 2021. Xbox is making big moves that some analysts are speculating can turn them into the next Netflix for Games.

We are pursuing an expensive opportunity in gaming- from the way games are created and distributed to the way they are played and viewed- surpassing $10 billion in revenue this year for the first time. We are investing aggressively in content, community, and cloud services across any endpoint to expand usage and deepen engagement with games. Xbox Live as now 57 million monthly active users.

For last, Microsoft is evolved in the Autonomous Vehicles market too. It´s taking full advantage of Azure by using it as the base for connecting car services. It was recently publicized that is going to be user in Volkswagen in over 5 million cars starting in 2020. VW has a very ambitious project of having EVs as good as Tesla for half of the price by 2020. These two giant companies working together are going to implement massive empowerment in the industry and a fearless competition with Tesla.

2. Acquisitions

Microsoft bought GitHub in 2016. This development platform is used by 31 million developers that share code and host and review project management and build software from open source to business.

MSFT paid a high price of $7.5 billion dollars for GitHub in an all-stock transaction. But because GitHub has a gigantic club of fans, it opens thousands of doors for Microsoft to get to these developers that are behind every mega technology trend out there.

About LinkedIn, the largest professional network in the world with over 562 million users in more than 200 countries. Microsoft bought it for a total purchase price of $27.0 billion. Although seems to be a high price, Microsoft´s LinkedIn revenue increased $3.0 billion to $5.3 billion over 2018 wish is a YoY growth of 130%.

3. Earnings and balance sheet

I know it would be funnier to write some more about gaming, with the next exciting big game. Or about autonomous vehicles that project us to the future with all the next-gen technology.

Unfortunately, I´m going to talk about boring numbers of the most boring company in the world.

Microsoft Q4 press release told us that this company is almost in the perfection mode. We know that the pandemic issue accelerated the shift to remote work and that some companies are benefiting from it. But you´ve seen also a brutal drop on advertising in some big tech companies.

Yet, Microsoft started the 2020 first quarter with amazing growth in every sector. Office 365 rising 27%. LinkedIn 22%. Dynamics products and cloud services 20%. Dynamics365 49%. Server products and cloud services 32%. And Azure 61%.

Satia Nadela says:

We´ve seen two years' worth of digital transformation in two months. From remote teamwork and learning to sales and customer service, to critical cloud infrastructure and security- we are working alongside costumers every day to help them adapt and stay open for business in a world of remote everything.

If you see the Q4 report, Microsoft beat the estimated revenue by $38 billion vs $36 billion expected.

Microsoft beats Q4 EPS estimate with $1.46 vs $1.36 expected.

Only in productivity, the results were below estimates with revenue $11.75 billion vs $11.9 billion estimated.

Microsoft has a 34.24% growth year to date on the stock price.

With this analysis we see the PE ratio rising, wish makes me waiting for a correction to keep buying the stock. PE ratio is at 36.89, wish is too high for me. But you know how the market works. Wait for better timing to buy and keep following good and well-managed companies.

My average cost base is at $152.23 and right now I think that there are too many gamblers buying and entertaining themselves in blockage apps while they can’t go to the casinos. And with the pandemic, all the world is depending on tech devices. I think that after the lockdown things will normalize and so will the prices.

4. The Price of Tomorrow

Microsoft proved that it´s gonna be one of the key winners of the new paradigm of work, live, and even play from home.

Satia Nadela says that tech intensity is the key to business resilience at this point.

But one major event is coming toward all of us and it will dramatically change our world as we see it.

Technology is a deflationary force. All the things that technology solves are making things cheaper and cheaper. All the things that technology solves replace jobs. So, this deflationary force is betting against the inflation that the modern economy always tried to manage.

The majority of the deflation is still in front of us- driven by technology advancing at an exponential rate. It took $185 trillion of debt to produce about $46 trillion of GDP growth over the last twenty years.

Nassim Nicholas Taleb points out in his book Antifragile:

Systematically preventing forest fires from taking place ‘to be safe’ makes the big one much worse

On the other hand, it´s important to explain that debt did create jobs and transform our lives for better. Generally, all over the world, the benefits of this trillion-dollar debt solved poverty, empowered women, gave a home to those who didn´t have one.

Easy credit, ironically created real wealth and even helped venture capital and startups. They benefit and thrive transforming themselves into gigantic holdings and major tech companies, creating jobs, and growing entire sectors.

But that boom has now led to another boom. The simple power of technology is that allows for abundance without the same amount of jobs or income. So, we have to rethink the pillars of the new rising economy. Especially the politics, that seem to be far away from these new realities.

5. How Congress Blindly Sees Tech Companies

Microsoft is right now the only big tech ( Amazon, Facebook, Apple, and Alphabet ) that is not being pursued by the US government and Congress about monopoly issues.

But it´s a question of time. With the recent news to Microsoft´s possible acquisition of Tik Tok´s US operations, the company is putting it´s both feet in the territory war.

The future of big data and these monopoly issues it´s probably gonna be the next huge weapon for politics to fight against each other. And it´s starting with the USA and China.

As an investor, a possible retaliation is gonna be one factor in this sector that can really damage the value of tech companies.

Frankly, I don´t believe that the US Congress and the government are going to harm their own companies. In times where Chinese companies are competing with Silicon Valley for global supremacy, it would be a stupid decision to regulate at a point that Microsoft, Apple, Amazon, Facebook, and Alphabet would have to fight in the global economy with ties on their hands.

For the United States of America to keep winning this race, they will have to empower these companies, because China is coming with all their strength.

Sometimes the world seems upside down. The pandemic issue. The technology disruption. The end of another big debt cycle. The fight of two major empires (the USA and China ) for total supremacy.

These are gonna be very interesting times. And I´m very curious about how can we, as human beings, solve these differences.

How much did we, as a planet, really evolved and what we all want for our future?

Another war? More fighting? More hunger and disease?

Is this what we are fighting for?

Never in history, we had more peace and love between cultures and races. 50 years ago, 100 years ago almost every country was at war with somebody.

The simple power of technology is that allows abundance. And I don´t believe that any human being doesn´t want to live with abundance. Because every day each one of us fights for abundance.

Microsoft will be one of the principal players in this new paradigm. Computers are capable to translate raw data into a deeper understanding of our human experience. And with Artificial Intelligence, that process is a lot closer than you might think.

Microsoft AI is developing computer language. It´s a very complex process. We as humans take several years to evolve our language skills. Now imagine the process on an AI computer? But Microsoft is developing the largest, most powerful language model you can imagine.

In 2017, AI could reach to speech recognition, converting conversational speech into text.

In 2018, AI could do reading comprehension. Reads documents and responds to relevant questions. In the same year, they reach speech synthesis, which is artificially producing human speech. Another thing was accurately converting text from one language into another.

In 2019, a new AI trend emerged of enabling models to use self-supervised learning to form an understanding of the rich contextual semantics of language through readily available relevant content. Self-supervised learning to form an understanding of the rich contextual semantics of language through readily available relevant content.

What 2020 will bring us, we don´t know. Even in Medium, we feel that some kind of invisible force is here to help us write in an easier way. I feel it, and you feel it, too.

The future is were. Microsoft is working 24–7 to provide us better tools to create abundance. At what cost? We don´t know.

I am optimistic. And I love technology.

I just hope Microsoft can keep doing this extraordinary journey.

And I can promise you I will follow this company, hoping I can keep being one of the million shareholders that contribute and also benefit from technology disruption that will bring fantastic things to our homes, to our children, to our countries, and to our lives.

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