... Where are they?
Dunno where they are, but they make some valid points. Microsoft's P/E averaged 36 for the last decade and now sits at about 70. If Microsoft's growth slows, this PE will probably decline too. One big difference though: Today we've a number of stocks trading at extreme multiples but lacking the fundamental value of Microsoft.
In comparative terms Microsoft's PE seems much more reasonable than in absolute terms, but if this stock's price is a little crazy in a market that is downright insane, this stock may look reasonable, but it's still too expensive. One must ask themselves if they are buying this stock because they feel this company will perform well enough in the future to justify today's price, or are they hoping that an even bigger fool will pay an even more inflated price tomorrow. Investors who know themselves will act appropriately: others will find their pockets picked.
Microsoft's stock price seems to experience periods of rapid appreciation followed by periods of flat or declining prices. The 'bad' times last from 12 to 18 months. Last week's performance looks like Microsoft is making the long awaited transition from bad to good. It's a time for the longs to reap the rewards of their patience. The 'change' comes so quickly and so unpredictably that only very nimble traders or long term holders benefit. Pity the shorts: They get caught in the same trap repeatedly.
I don't know how high this current updraft will take Microsoft, but I do know it will be taken too far, and that we'll see many people join the party too late and not enjoy themselves as thoroughly as the early arrivals, or even wish they'd never came.
My long-winded way of saying that Microsoft (the company) seems to grow steadily and consistently, while Microsoft (the stock) fluctuates above and below its current value, and that the last few years we've seen these fluctuations getting both larger and more irrational. There's two ways of making profits with this stock: Skilled traders and long-term holders. Both will do well. One will have earned their reward with their skill while the other will have earned their reward for their faith and patience.
A month ago, Microsoft traded at $85. Imagine how those who bought at that price feel today. (Or how those who sold.)
Cheers, PW.
ACB<$1 |
