Barron's Picks 10 Stocks for the Long Haul

And one of them is my latest pick-up, Microsoft (MSFT/NASDAQ), which of course is going for less than I paid for it (serves me right for not sticking like glue to Geoff Gannon's "$17.50 or below" recommendation for the stock).

From Barron's:

The shares, at a recent $15.27, have been a big disappointment. Despite attracting many value hunters, the stock has headed ever downward as spending on information technology declines.

That problem masks the company's long-term strength. Wally Weitz, who helms asset manager Weitz & Co., Microsoft "a gigantic cash machine."

Bill Nygren, co-manager of the Oakmark Fund, notes the company's low price-to-earnings ratio -- less than nine, based on his estimates for this year's earnings -- is closer to seven if you exclude the $4 a share in net cash.

"Investors, especially individual investors, put too much focus on growth expectations and too little focus on price," he says.

The stock is also sporting a dividend yield of 3%, slightly more than last week's quote for 10-year Treasury bonds.

I don't follow Weitz or Nygren closely at all. But Barron's is right about value players being in the stock -- I've mentioned previously that among those in Microsoft are Cundill, First Eagle and Fred Hickey, if we can consider him something of a value investor. Also, Bloomberg recently reported that Bill Fleckenststein had shutdown his short-only fund after sometime and gone long Microsoft.

I suspect this stock and most others will have a good long wait until prices go up. But at least the days are getting longer in my neck of the woods. Keep plenty of ice cubes on hand and let's weather the turbulence.

Comments

[Michael Comeau]

I've been a big detractor of MSFT in the past but the positive reviews of the Windows 7 beta bode fairly well for the OS' success vs the truly awful Vista. MSFT is slowly building some critical buzz and if they can get people excited they might slow down Apple's market-share gains.

[John]

Michael: In my personal use of a computer, I'm Mac all the way. Yet I think Fred Hickey makes a persuasive case for MSFT in the latest Barron's Roundtable.