Microsoft: A Gem In Plain Sight?

So is Microsoft (MSFT) a gem in plain sight? According to Brad Hinton, a portfolio manager with Weitz Funds, it certainly is.

During a recent Barron's interview, the value investor explained why he likes Microsoft, calling it a "hidden gem in plain sight."

Loading Up on Cash-Rich Value Stocks

The company sells at roughly 9x earnings but Hinton later in the interview pointed out that multiple is pre-cash. It's even cheaper if you back out net cash.

Here's the top ten holdings of the fund family's flagship Weitz Value Fund (WVALX) as of September 30, 2011:

1) Microsoft (MSFT)
2) AON (AON)
3) Berkshire Hathaway (BRK.b)
4) Google (GOOG)
5) Dell (DELL)
6) Wells Fargo (WFC)
7) Texas Instruments (TXN)
8) Conoco Phillips (COP)
9) United Parcel Service (UPS)
10) Tyco International (TYC)

Morningstar: Weitz Value Fund Portfolio

Microsoft has more than $ 5/share of net cash and investments (cash and investments minus debt) on the balance sheet. Taking that into account, the company is selling at less than an 8x multiple of earnings.

Certainly not expensive but, as I explained here and on other occasions, there's just no technology business that I'm comfortable with as a long-term investment.


Long positions in MSFT, BRKb, GOOG, DELL, WFC, and COP

Barron's interview
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Microsoft: A Gem In Plain Sight?
Microsoft: A Gem In Plain Sight?
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