With all the attention that computer-related companies such as Apple and Facebook are receiving these days, some have forgotten about or have written off Microsoft. It deserves some consideration, though.
Sure, there are valid reasons to worry about its future. It was late to the mobile scene, and few people even know about its app store. Perhaps worst of all, the PC market, where Microsoft has long been the dominant operating system, is ailing as consumers flock to tablets and other mobile devices.
Still, there’s a lot to like about Microsoft. It’s digging deeper into the cloud-computing and gaming realms, with its Windows Azure cloud platform and its new Xbox 720. Its Surface tablet’s market share is growing, too. Its Windows 8 system is in the works, and it remains a major force in business computing.
The company now has a broad reach, present across many forms of computing, such as smartphones, tablets, video game consoles, desktop operating systems and more. It may be able to boost its strength by consolidating some or all of these into a single big ecosystem, one that competitors might find it hard to challenge.
Better still, the stock seems attractive at recent levels, sporting a P/E ratio of 16, a forward-looking P/E of 9, and a dividend yield near 3.2 percent that it has been growing aggressively.
Ask the Fool
Q: What are the “trade date” and “settlement date” on my brokerage statements? – G.V., Watertown, S.D.
A: When you place an order to buy or sell a security with your broker, there will be a “trade date” and “settlement date.” The trade date is the date the order was executed; it counts for tax purposes. The settlement date is when the cash or securities from the transaction hit your account.
My dumbest investment
Worldcom. Williams Communications. Global Crossing. I rode two of these companies on their way up, more than doubling my money, and then rode all of them all the way down to zero. For a long time, they still showed up in my online portfolio, so I would get to look at them and remember, every time I logged in to my brokerage account. Buy and hold has its limits. – C., online
The Fool responds: You’re right. We like to differentiate between the common recommendation to buy and hold and a sounder variation on it: Buy to hold. In other words, don’t just buy stock in a company and forget about it for eons. Instead, buy with the aim or hope of holding on for a long time – but keep up with the company’s progress, too, so that you don’t end up blindsided by some troubling development.
Great fortunes have been made by people who hung on to stock in solid companies for decades, through many ups and downs. Just be sure a downturn is due to a short-term problem, not a long-term one.