Senior Vice President Matthew Norris of Waddell & Reed, Inc. says Microsoft Corporation (MSFT) is an example of a stock trading at a significant discount to its true intrinsic value.
Whenever I buy a company, we think about what it’s truly worth, what’s that stock worth. If it’s trading at a big enough discount — for me, that should be usually 30% discount to what I think its true intrinsic value is — then it’s a buy.
Microsoft was below $50 only about nine months ago or so. I think Microsoft is viewed really as an old-school-type stock that isn’t very exciting the way Facebook and Amazon and Google are, but they are competing very well with cloud computing. When you think of cloud computing, everyone thinks of Amazon Web Services; that’s the big winner.
A lot of people don’t realize it, but Microsoft’s cloud-computing service is somewhat hidden inside such a large company but growing very rapidly. They are a major player.
The stock started to move up recently because I think as each quarter comes and they announce how they are doing, that’s becoming more and more apparent to people. That is a name that was cheap because people thought it was being left behind, and that wasn’t really accurate.
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