Motley Fool: In the clouds

Microsoft (Nasdaq: MSFT) is responsible for powering more than 1 billion computers and devices around the globe via its Windows operating system. Recently, the company has grown more diverse, with forays into gaming and more.

It might come as a surprise that Microsoft’s largest business is cloud computing, which accounted for over $60 billion in revenue during fiscal 2021, making up over 35% of the company’s total. Microsoft’s Azure platform is focused on serving businesses, and is used by 95% of Fortune 500 companies. It offers cloud infrastructure, artificial intelligence, data analytics and security – and the list continues to grow.

Microsoft’s cloud segment is outpacing its overall growth, highlighting corporate appetites for cloud-based services, which will drive growth into the future.

Investors buying Microsoft’s stock for exposure to cloud computing also get the dominant Office 365 software business, not to mention the Xbox console gaming platform and Surface line of tablets and notebooks, which are multibillion-dollar businesses in their own right. The stock also pays a dividend that’s been hiked by an average of 10% annually over the past five years.

Long-term investors interested in cloud computing should give Microsoft a closer look. (Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of the Motley Fool’s board of directors. The Motley Fool owns shares of and recommends Microsoft.)

Ask the Fool

Q: What’s a secured credit card? – K.D., Garden City, Idaho

A: If you’re having trouble getting approved for a credit card, it may be due to having a bad credit record – or perhaps no credit history at all. You’re not out of luck, though: You can apply for a “secured” credit card instead.

Secured credit cards require their holders to fund an account with cash, which serves as a kind of security deposit and works like a credit limit. If you’ve deposited $1,000, you can charge up to that amount, pay the bill when it comes due, and then resume charging again, up to that amount. Secured credit cards can let you build a good credit history, eventually helping you qualify for a regular credit card.

Q: Is a company having a lot of cash on its balance sheet a good thing? – O.S., Franklin, Tennessee

A: It can be good or bad. A lot of cash on hand means the company can act on opportunities that arise, such as buying another company. Some companies also store cash so that they will be able to cover taxes due if and when they bring home profits generated abroad. Excess cash can be used to reward shareholders by spending it on dividends or on repurchasing shares. (It’s generally only worthwhile to buy back shares when they’re undervalued, though.)

A lot of cash just sitting around – especially when interest rates are low – isn’t being put to productive use, so many companies try not to keep too much on hand. If they need more cash at some point, they assume they can borrow it or issue more shares of stock.

My dumbest investment

My dumbest investment was wasting a chunk of money on a loser stock, mainly because I wasn’t able to decide to dump it. I tend to hang on to losers too long, thinking they will come back. Unfortunately, I have many more investment mistakes to choose from. I currently hold 15 different stocks that are losing money – losing more than the total value of my house!

But I’m thankful for a few things – that we have the money to be able to invest enough to be able to lose that much, and that our winners far, far outweigh our losers. I’m also thankful that the Motley Fool was recommended to me by a co-worker almost a quarter of a century ago. – Rob S., online

The Fool responds: We’re happy that you’ve kept up with us for so long, and we hope to serve you well for another 25 years.

Deciding when to sell can be a tough decision. Ideally, you’ll follow your holdings throughout the year, reading their news and financial reports at least quarterly. That can help minimize negative surprises, as you may see trouble coming. When a stock has fallen significantly, take some time to do some digging to determine whether the company is facing temporary or long-lasting problems. Holding on through short-term headwinds is often best, but long-term challenges might be cause for selling.