We recently published a list of Billionaire Lee Cooperman says the market is expensive, but these 10 stocks are cheapIn this article, we will look at how Microsoft Corporation (NASDAQ:MSFT) compares to other cheap stocks.
Leon Cooperman recently laid out his conservative economic forecast and talked about stocks he’s watching in a CNBC interview. He believes the U.S. is headed for financial disaster because of a lack of attention to rising debt. He also noted that nothing seems overvalued when a 10-year bond is priced at the current rate.
“My assumption is that we are heading for a fiscal catastrophe in our country. No one in the economy is focused on taking on debt. My second assumption is that nothing is overvalued when a 10-year bond is at the current interest rate of 3.9%.”
Cooperman compared this to the Nifty-Fifty period of 1972, when government bonds were at 6.5% and several companies with high earnings multiples eventually went bust. He pointed out that these companies were acquired by JP Morgan despite their high valuations.
“In the Nifty Fifty period of 1972, government bonds rose 6.5%, Avon Products was at 65x earnings and went bankrupt. Eastman Kodak went bankrupt at 48x earnings. IBM went bankrupt at 37x earnings. These are companies that are being actively bought up by JP Morgan in the US.”
Cooperman stressed that with the 10-year yield at 3.932 percent, nothing seems overvalued. He expects interest rates to remain low and expects the Federal Reserve to cut rates in September, probably by 25 to 50 basis points. He expects this to lead to a slow positive movement in the yield curve, with the yield on 10-year bonds rising and their price falling.
Leon Cooperman also mentioned that he considers the current environment to be more of a “stock market” than a unified stock market. In addition, he expressed concern about the health insurance sector, noting that these companies are trading at low multiples despite generating excess capital and buying back their own shares. Cooperman then emphasized that he is guided by valuation levels when evaluating investments.
Leon Cooperman follows a value-oriented investment strategy, focusing on undervalued stocks and using a top-down approach to selecting sectors. He combines fundamental analysis with a bottom-up approach to constructing and managing portfolios. Omega Advisors, which manages over $3.3 billion in assets, most of which come from Cooperman’s own wealth, manages approximately $4.37 billion for seven clients. The firm’s first-quarter 2024 13F report showed $2.4 billion in securities under management, with the top 10 holdings accounting for 61.09% of the portfolio.
Our methodology
In this article, we review Leon Cooperman’s recent CNBC interview and highlight ten stocks he owns and has mentioned. We’ve also provided analyst ratings, key details about each company, and the number of hedge funds investing in them.
Why focus on the stocks hedge funds invest in? Our research shows that if you follow the top picks of leading hedge funds, you can generate returns that beat the market. We use this strategy in our quarterly newsletter, where we select 14 small-cap and large-cap stocks each quarter. Since May 2014, this approach has produced a return of 275%, beating the benchmark by 150 percentage points. (Further details can be found here)
A development team that works together to develop the next version of Windows.
Microsoft Corporation (NASDAQ:MSFT)
Number of hedge fund investors: 293
Microsoft Corporation (NASDAQ:MSFT) is a leading technology company known for its software, cloud services, and innovative solutions. Microsoft Corporation (NASDAQ:MSFT) is a major industry player with a broad range of products, including Windows, Office 365, and its powerful cloud platform Azure.
Leon Cooperman highlighted his investment in Microsoft Corporation (NASDAQ:MSFT) as a key technology pick. He noted that while Microsoft Corporation (NASDAQ:MSFT) is not cheap, the current market rotation is significant and suggests that the market’s optimism, especially around the extreme valuations of the top technology stocks, may be too optimistic.
“I own Microsoft. It’s my window to technology. While I wouldn’t say it’s a particularly cheap stock, I believe this market rotation is real. Historically, markets that have experienced a rotation often enter a correction phase. The move away from the extreme valuations of the ‘Magnificent 7’ suggests something else is at play, and a stagnant market may be too optimistic.”
In the fourth quarter of fiscal 2024, Microsoft Corporation (NASDAQ:MSFT) reported annual revenue of over $245 billion, up 15% year-over-year, with cloud revenue increasing 23% to over $135 billion. Earnings per share (EPS) reached $3.06, beating the forecast of $2.98. Azure, Microsoft’s cloud service, saw revenue increase 20%, cementing its top position in the cloud market. The $69 billion acquisition of
Activision Blizzard, Inc.
(NASDAQ:ATVI) is expanding Microsoft Corporation’s (NASDAQ:MSFT) gaming and entertainment offerings and further integrating them into its cloud services. New releases like Windows 12 and updates to Office 365 demonstrate Microsoft Corporation’s (NASDAQ:MSFT) continuous innovation.
ClearBridge Sustainability Leaders Strategy stated the following about Microsoft Corporation (NASDAQ:MSFT) in its second quarter 2024 investor letter:
“The strategy underperformed the Russell 3000 Index benchmark, largely due to our diversified positioning, although we maintain a significant portfolio allocation to AI-related large companies. In fact, these positions were among our top contributors in the quarter, such as Microsoft Corporation (NASDAQ:MSFT). The company is finding more and more ways to use AI for sustainability goals, such as its ability to better measure, predict and optimize complex systems, which can help its partner communities reduce wildfire risk.”
Overall MSFT 1st place on our list of cheap stocks to buy. While we recognize MSFT’s potential as an investment, we believe that under-the-radar AI stocks offer greater prospects for higher returns, and in a shorter time frame. If you’re looking for an AI stock that’s more promising than MSFT but trades at less than 5x earnings, read our report on the cheapest AI stock.
READ MORE: $30 trillion opportunity: The 15 best humanoid robot stocks to buy, according to Morgan Stanley And According to Jim Cramer, NVIDIA has “become a wasteland”.
Disclosure: None. This article was originally published on Insider Monkey.
