If any TV quote perfectly describes Microsoft Corporation (NASDAQ:MSFT), it would be “Marcia, Marcia, Marcia!” Indeed, it is not easy being the middle child. The eldest is the frontrunner and gets all the praise. The youngest gets the sympathy vote by virtue of blind luck. The middle is so blah, and that’s the view of Microsoft stock, if anybody thinks about it at all.
I’m not the only one that believes this perspective. InvestorPlace contributor Richard Saintvilus last month wrote that MSFT stock “once again appears to be a forgotten success story, overlooked amid the recent dominant performances by the likes of Amazon.com, Inc.(NASDAQ:AMZN), Tesla Inc (NASDAQ:TSLA) and Apple Inc. (NASDAQ:AAPL), which are all trading near all-time highs.”
Fast forward to the present day and not much has changed. Amazon continues to dominate e-commerce and squeeze out the terrified brick-and-mortars. Tesla is basking in the glow of its 52% year-to-date performance. Apple shows no sign of losing consumer and investor confidence, despite a recent slip in market value.
Microsoft stock also has plenty to celebrate. Shares are trading near all-time highs on an adjusted basis. The company has been a consistently clutch player this year, so far bringing in almost 12.5% YTD. Granted, these aren’t Tesla figures by any means. Still, the tech firm is getting no love.
I think that’s a mistake. If investors have no problem getting into an Apple or Amazon at all-time highs, they shouldn’t be deterred by MSFT stock.
Microsoft Stock Has So Much Going for It
On the fundamental front, the company enjoyed a fairly solid third-quarter earnings report. As InvestorPlace contributor Will Ashworth noted, fireworks were absent, but it got the job done. MSFT stock also managed to boost its Q3 revenue to $22 billion, or a 7.6% increase over the year-ago quarter. Sales growth has been a sore spot in the past several quarters, so this was a critical victory.
The consumer tech firm is aggressively asserting itself against Apple and Alphabet Inc (NASDAQ:GOOG, NASDAQ:GOOGL) in the laptop sphere. Microsoft introduced Windows 10 S, which is a “streamlined” — read cheaper — version of the full-power Windows operating system. Such a platform allows the company to pump out portable computers at “fighter brand” price points.
MSFT will attack the higher-end market with its flagship Surface, which will be released next month with a $999 retail tag. According to Mr. Ashworth, the “price is too high for the educational market” but will go head-to-head against Apple’s MacBook Pro computers.
Furthermore, investors would be remiss to overlook the innovation aspect of Microsoft stock. While competing heartily in the hardware space, MSFT is courting the cloud. Their Azure platform may very well change the world. Not only is it churning up sales growth, but it’s also making a strong impact on the multi-billion dollar companies that use it.
The Technicals Are Beautiful … and That’s What Matters!
With all that said, I am reminded by an old, Wall Street aphorism — don’t fight the tape. And when we’re talking about Microsoft stock, the tape is good — darn good, in fact!
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For Home Depot, shares keep rising because home improvement and repair is a secular industry. I would argue that Microsoft has become so ingrained in our society that MSFT stock is now a secular investment.
I definitely don’t see it as a “tech investment” the way most people view that term. That is, Microsoft stock is no longer a high risk, high reward opportunity. Throughout the nutty era of the 1980s and 1990s, MSFT returned on average 62.5% annually. That time period also produced three years of triple-digit returns.
Contrast that with this decade, where investors have averaged less than 14%. If the year were to end right now, this average wouldn’t change that much.
I don’t view the declining performance as a negative. Microsoft stock is on track to bring home six consecutive years of positive returns. That hasn’t happened since the time period between 1994 through 1999. More significantly, no one is claiming that MSFT stock is going ballistic towards an uncontrollable bubble. The software giant is simply experiencing a steady flow of demand.
That’s ultimately what seals the deal. MSFT stock has gone through its wild-child phase and is now a mature, dependable investment. I doubt that it will ever return to its triple-digit glory days, but that’s just fine for those who seek consistency.
As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.
