In the Portfolio Spotlight Series – i will be going through each holding in my portfolio and the selection criteria for its entry. Stocks are either
1. Great companies with consistent earnings, free cash flow, strong competitive moats. These are first team players
2. Potential growth companies with breakout earnings, growing competitive moats etc… these are hot youth prospects
3. Geographical / sector diversifications.. these are meant for diversification purpose and are reserves
The first in the Portfolio Spotlight series is Microsoft. It is the biggest holding by value in my portfolio and I have strong conviction in this stock mid to long-term. Microsoft currently holds the position of Goalkeeper in my team.
1)Consistent Revenue Growth
2)Consistent Free Cash Flow
3)Market Cap and Revenue Multiple Growth
4) Consistent Net Income Multiple
Microsoft has had consistent net income multiple. This indicates a management team which is efficient in handling its bottom line. A great management team is very important!
5) Future growth
This last factor is fundamental analysis. Does Microsoft have future market growth driver(s) ? The answer is yes !
Most of Microsoft’s future growth drivers will leverage on its Azure Cloud Platform.
Already, Microsoft is making inroads into Defense sector which is traditionally a value sector (think Lockheed Martin, Boeing etc).
It won a 21.9 Billion USD contract over 10 years with the US Army to deliver more than 120,000 HoloLens AR headsets
With this contract win, Microsoft prove it has the ability to craft new product lineups and with first mover advantage.
Microsoft also won the famous JEDI Cloud contract awarded by the US Defense Department back in Oct 2019, beating the likes of Oracle and Amazon. However Amazon refuse to admit defeat and has launch countless lawsuits to dispute the win, mostly base on the argument that the win was unfairly influenced by Donald Trump as a result of his private disputes with Amazon Chairman Jeff Bezos over The Washington Post.
Microsoft’s current product lineup are
Productivity and Business Processes
1.Azure Cloud Services
1.Windows OEM, Commercial & Cloud
2.Devices (Microsoft Surface)