Microsoft Corporation (MSFT) currently has a strong competitive position in the enterprise application software space, currently holding several strong franchises that are undervalued by investors and which could unlock significant potential once investors realize the strength of their cloud and server business, says David Cassese, Portfolio Manager at BlackRock.
“As the market there, we think, has been extremely focused on the weakness in the consumer PC business, which is real and is a headwind for them. But it’s a much smaller percentage of the business than most people think, and we think the market has been ignoring how strong their competitive position is in the enterprise, how sticky that ecosystem is there,” Cassese said.
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Cassese says MSFT is trading inexpensively and has good growth opportunities, and it is just one example of a mature tech company that some refer to as old technology and which trades at a cheap valuation. He adds that many investors are currently afraid of the high valuation of the stock market, but he says a historical context provides more perspective.
“It’s important to remember that this all-time high or this high compared to the highs of March of 2000 is a very different place. And the highs of the market in March of 2000, the multiple on the S&P 500 was 30 times. Right now, it’s 14 times. So it never feels good to be buying stocks at their highs, you have to keep it in perspective and you have to think about what is the absolute valuation on the market. So we think there’s a lot of opportunity out there,” Cassese.
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