Money Manager Says He's Buying Microsoft (MSFT) Because 'Nothing Fundamentally' Changed for the Company

We recently published a list of 10 Stocks Everyone’s Talking About as Trump Softens His Tone on China. In this article, we are going to take a look at where Microsoft Corp (NASDAQ:MSFT) stands against other stocks everyone’s talking about as Trump softens his tone on China.

Investors are desperately looking for signs of a market bottom after going through massive volatility and losses. 3Fourteen Research’s Warren Pies said in a latest program on CNBC that we are getting “close” to a market bottom based on his technical analysis. The analyst talked about key indicators he’s looking for:

“I do think that the White House is trying to deescalate the situation. One of the markers we’ve seen is that Peter Navarro hasn’t been on TV since April 13th, and that’s corresponding with this equity rally. Setting that aside, though, I think that a bottom, a confirmed bottom, has two components. You need to see washed out sentiment and positioning. We measured that in a number of ways: we measured it in inverse ETFs for retail, we measured it for vault targeting for institutions, and CTAs for trend followers. Across all those metrics, sentiment is depressed. That’s phase one of a bottom. Then, you look for technical confirmation. Philosophically, we’re always going to be late because of that ordering.”

READ ALSO 7 Best Stocks to Buy For Long-Term and 8 Cheap Jim Cramer Stocks to Invest In

For this article, we picked 10 stocks investors are currently focusing on. With each stock, we have mentioned the number of hedge fund investors. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).

Microsoft Corp (NASDAQ:MSFT)

Number of Hedge Funds Investors: 279

Malcolm Ethridge, managing partner at Capital Area Planning Group, said in a latest program on CNBC that he’s buying Microsoft Corp (NASDAQ:MSFT) because the company’s fundamental bull thesis is intact:

“I like to buy strong companies at moments of temporary weakness that don’t necessarily make any sense. Nothing fundamentally has changed about Microsoft. For those that didn’t really like the fact that their capex was 80 billion to 100 billion, well now you get to buy all the growth that that capex buys at a discount. Right, so you’re looking at something like 18 to 20% off between the two names. To Stephanie’s point, she led off with, I don’t have to buy the second or third best player in a sector anymore at these kinds of discounts. I can go buy the best name in the space, which is Microsoft or Amazon. And so that’s why I’ve been adding to those names in some of those MAG 7 names, especially the ones that aren’t negatively impacted by the consumer.”

Generation Global Equity Strategy stated the following regarding Microsoft Corporation (NASDAQ:MSFT) in its Q4 2024 investor letter:

“Microsoft Corporation (NASDAQ:MSFT), the world’s largest software company, has been in the portfolio for over a decade. We like the firm because its products align closely with society’s evolving needs. As the world digitises, demand for Microsoft’s tools will continue to grow. The company enjoys a wide economic moat – built on its unique market position, deep customer understanding and extensive global footprint.

Microsoft’s management team has a long-term vision. It makes bold investments in future growth, most recently in AI. We forecast that the IT intensity of the economy will double over the next 15 years. Microsoft is a rare company with USD 250 billion in revenues, projected to grow at 16% annually over the next five years.14 Earnings-per share could grow faster. Despite its near-term valuation appearing high, we believe Microsoft is well positioned to lead in the AI era, potentially doubling or tripling its market share. Additionally, we expect returns on capital (ROC) for its AI related investments to match historical levels, despite market scepticism.

There are risks. Demand for AI systems may not materialise as expected, and increasing pricing power among suppliers like Nvidia could pressure margins. Still, from our analysis we see substantial long-term value in this name.”

Overall, MSFT ranks 2nd on our list of best mid cap growth stocks. While we acknowledge the potential of MSFT, our conviction lies in the belief that under the radar AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than MSFT but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires.

Disclosure: None. This article is originally published at Insider Monkey.