Guru and contrarian investor Steven Romick (Trades, Portfolio) trimmed his stake in Microsoft (MSFT, Financial) during the third quarter, removing 1,405,260 shares from his award-winning FPA Crescent Fund for an average price of $56.45. The trade has a -0.70% impact on Romick’s portfolio. He now owns 6,327,480 shares of Microsoft.
Microsoft has a market cap of $449 billion, an enterprise value of $387.89 billion, a price-earnigns (P/E) ratio of 27.97 and a price-book (P/B) ratio of 6.24.
Microsoft was founded in 1975 by Bill Gates (Trades, Portfolio) and Paul Allen, Microsoft develops, licenses and supports a wide range of software products, services and devices that deliver new opportunities and greater convenience with the goal of empowering every person and every organization on the planet to achieve more. Microsoft currently operates in over 190 countries worldwide, and is currently ranked 25th on the Fortune website as one of the largest U.S. corporations by total revenue for its respective fiscal years.
The current CEO of Microsoft, Satya Nadella, was appointed the position in February 2014. Nadella has been pushing Microsoft’s business towards building intelligent cloud platforms to enable advances in business strategy, as well as to enable the ability to connect with its customers in new and compelling ways. Microsoft is one of the largest providers of cloud computing at scale, and it is well-positioned to continue to help businesses move to the cloud and focus on innovation in the future.
The cloud technology is also used to prevent cybercrime. Microsoft created the digital crimes unit to investigate and fight cybercrime. The company uses the cloud to visualize information to track down criminals with advanced analytics tools. It is now possible for Microsoft to track down criminals using advanced analytics in real time, whereas it used to take days to track down criminals.
According to GuruFocus, Microsoft has a 6 of 10 financial strength rating, with a cash to debt ratio of 2.11, an equity to asset ratio of 0.37 and an interest coverage of 36.17. Its Altman Z-Score of 3.52 indicates that it is in the safe zone and is not in danger of filing for bankruptcy in the future. The company also has a 7 of 10 profitability and growth rating with an operating margin of 23.65%, a net-margin of 19.33%, a ROE of 21.64% and a ROC (Joel Greenblatt (Trades, Portfolio)) of 130.65%.
Romick likely decided to reduce his stake in Microsoft because the company is currently trading at a 10-year high in price. Microsoft is also currently trading above its intrinsic value, which could have been another influencing factor in Romick's decision to reduce his stake in the company during the third quarter. Since the first quarter of 2011, Romick and his award-winning FPA Cresent fund has gained an estimated 76% with his investment in Microsoft.
Microsoft is trading above its intrinsic value based on the Peter Lynch chart below.
Disclosure:Â Author does not own any shares of Microsoft.
Start a free 7-day trial of Premium Membership to GuruFocus.
