Microsoft has transformed from what was long a slow and staid name into something like the all-purpose core holding of this market moment.
You say you want to play the emerging cloud-services quasi-duopoly without having to worry about what it costs Amazon to ship a pair of flip-flops overnight? Microsoft is the stock for you.
In an investment industry that carves up the market into thematic exchange-traded funds to reflect a wide set of tastes and tactics, Microsoft is over-represented versus its S&P 500 weight in ETFs pursuing the following categories: mega-cap growth, momentum, low-volatility, quality, dividend-growth and a raft of ESG portfolios.
Still, those earnings are almost all free cash flow, and in this market a dominant growth company valued at around a 3% forward free-cash-flow yield is pretty much the going rate. The obvious question is whether the acclaim for Microsoft has become a bit extreme and uncomfortably unanimous. Are too many investors crowding into this one massive obvious leader, mistaking blind momentum-chasing for paying up to own the best?
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