Getty Images Microsoft ( MSFT ) has returned to valuation levels last seen before the COVID period despite a business that, in my view, is stronger today with a more diversified revenue base and a leading position in AI infrastructure. The recent multiple compression mainly reflects concerns around high AI-related capex and the sustainability of growth. I think the market is currently too focused ...
Getty Images Microsoft ( MSFT ) has returned to valuation levels last seen before the COVID period despite a business that, in my view, is stronger today with a more diversified revenue base and a leading position in AI infrastructure. The recent multiple compression mainly reflects concerns around high AI-related capex and the sustainability of growth. I think the market is currently too focused on near-term margin pressure and not enough on how strong demand for compute, data, and enterprise software actually is. At current levels, I view the risk/reward as attractive for long-term investors, although upside is likely to be more gradual than in prior cycles given the ongoing investments. Company Overview Koyfin, own calculation Microsoft is one of the most profitable large-cap software companies. This is mainly thanks to its scalable, recurring revenue model across its three core segments : Productivity and Business Processes, Intelligent Cloud, and More Personal Computing. Microsoft 10-K, own calculation What is more interesting, however, is how different the profitability is. As shown in the chart above, margins in Productivity and Business Processes have expanded significantly over the past years, while More Personal Computing remains the lowest-margin business. The reason is fairly straightforward. Margin expansion in Productivity and Business Processes, which includes Office 365 and AI-powered offerings, has been driven by a favourable business mix shift and monetization of AI features. Both helped operating leverage. The more personal computing segment looks very different; it has a higher exposure to hardware, which is more capital-intensive and less scalable than software-based models. Also, weaker revenue trends in recent years have limited operating leverage. The Intelligent Cloud segment, primarily driven by Azure, also generates high margins. However, ongoing investments in data centres and AI infrastructure have partly offset margin expansion. This dy...
Getty Images Microsoft ( MSFT ) has returned to valuation levels last seen before the COVID period despite a business that, in my view, is stronger today with a more diversified revenue base and a leading position in AI infrastructure. The recent multiple compression mainly reflects concerns around high AI-related capex and the sustainability of growth. I think the market is currently too focused ...
Getty Images Microsoft ( MSFT ) has returned to valuation levels last seen before the COVID period despite a business that, in my view, is stronger today with a more diversified revenue base and a leading position in AI infrastructure. The recent multiple compression mainly reflects concerns around high AI-related capex and the sustainability of growth. I think the market is currently too focused on near-term margin pressure and not enough on how strong demand for compute, data, and enterprise software actually is. At current levels, I view the risk/reward as attractive for long-term investors, although upside is likely to be more gradual than in prior cycles given the ongoing investments. Company Overview Koyfin, own calculation Microsoft is one of the most profitable large-cap software companies. This is mainly thanks to its scalable, recurring revenue model across its three core segments : Productivity and Business Processes, Intelligent Cloud, and More Personal Computing. Microsoft 10-K, own calculation What is more interesting, however, is how different the profitability is. As shown in the chart above, margins in Productivity and Business Processes have expanded significantly over the past years, while More Personal Computing remains the lowest-margin business. The reason is fairly straightforward. Margin expansion in Productivity and Business Processes, which includes Office 365 and AI-powered offerings, has been driven by a favourable business mix shift and monetization of AI features. Both helped operating leverage. The more personal computing segment looks very different; it has a higher exposure to hardware, which is more capital-intensive and less scalable than software-based models. Also, weaker revenue trends in recent years have limited operating leverage. The Intelligent Cloud segment, primarily driven by Azure, also generates high margins. However, ongoing investments in data centres and AI infrastructure have partly offset margin expansion. This dy...
It's natural to be caught up in grief when a spouse, partner, or child passes away, which is why it's so important to understand what you'll need to do to collect Social Security Survivor benefits. Understanding now how to access the funds you'll need later should make it easier for you to manage Survivor Benefits when the time comes. When survivor benefits come to mind, it's natural to think only...
It's natural to be caught up in grief when a spouse, partner, or child passes away, which is why it's so important to understand what you'll need to do to collect Social Security Survivor benefits. Understanding now how to access the funds you'll need later should make it easier for you to manage Survivor Benefits when the time comes. When survivor benefits come to mind, it's natural to think only of a spouse, particularly because they're the ones who can draw Social Security spousal benefits . However, that's not quite true. Here's a list of who may be eligible to receive survivor benefits. Image source: Getty Images. Continue reading
Jordan Rochester, nicknamed “Mr. Brexit” for his UK-EU market insights, is generating new profitable trading ideas amid rising Middle East tensions. Rochester, now a macro strategist at Mizuho Bank, saw big market-disrupting implications as soon as the US-Israeli assault on Iran began. By the time trading started the following Monday, he was flipping his calls — shifting from a recommendation to g...
Jordan Rochester, nicknamed “Mr. Brexit” for his UK-EU market insights, is generating new profitable trading ideas amid rising Middle East tensions. Rochester, now a macro strategist at Mizuho Bank, saw big market-disrupting implications as soon as the US-Israeli assault on Iran began. By the time trading started the following Monday, he was flipping his calls — shifting from a recommendation to go long UK interest-rate futures to shorting them instead, while also advising clients to sell the euro against the dollar and buy inflation protection in Europe as oil began to surge, Bloomberg reported. “We had to get out of all of those trades,” Rochester said in an interview , regarding the about-face in his recommendations. “I just said to my team, ‘Sell them all, get out, do the opposite.” The strategist, working with colleagues Evelyne Gomez-Liechti and Masayuki Nakajima, had quickly concluded that the threat to energy supplies and resulting oil shock would be severe enough to potentially force central banks to raise rates to contain inflation — a stance not in reflected in markets, the report added. That early call proved prescient as well as lucrative for those who followed his advice: A month into the war, traders have swung from pricing in two UK interest-rate cuts this year to nearly three hikes, a dramatic turn that fueled one of the biggest bond selloffs in years. “He propped a short front-end rates trade early in March - nice call,” said James Athey, a portfolio manager at Marlborough Investment Management said, according to the report. “He’s an independent thinker.” For now, Rochester and his team are sticking to their bearish stance. On Friday, his team even doubled down on their view, adding a short Japanese interest-rate recommendation, the report said. During the UK’s messy exit from the EU, Rochester became “Mr. Brexit” to colleagues and clients for his analysis of how each twist in the saga would hit the markets. While Rochester isn’t always right, Lind...
Hong Kong homebuyers snapped up new launches on Tuesday as developers accelerated sales amid concerns over slower rate cuts and geopolitical tensions in the Middle East. By about 3.50pm, all 254 flats released at the La Mirabelle project in Tseung Kwan O had been sold, according to market agents. La Mirabelle in Harbour Bay – jointly developed by Sino Group, Kerry Properties, K. Wah International,...
Hong Kong homebuyers snapped up new launches on Tuesday as developers accelerated sales amid concerns over slower rate cuts and geopolitical tensions in the Middle East. By about 3.50pm, all 254 flats released at the La Mirabelle project in Tseung Kwan O had been sold, according to market agents. La Mirabelle in Harbour Bay – jointly developed by Sino Group, Kerry Properties, K. Wah International, China Merchants Land and MTR Corporation – is to be developed in two phases, each comprising about...
MicroStockHub/iStock via Getty Images Overview When I previously covered the abrdn Healthcare Opportunities Fund ( THQ ), I issued a hold rating due to the sector headwinds and limited growth potential at the time. Since my last coverage , THQ has traded lower as the rest of the market indices continue to pull back from their all-time highs. However, the fund has released an updated annual report,...
MicroStockHub/iStock via Getty Images Overview When I previously covered the abrdn Healthcare Opportunities Fund ( THQ ), I issued a hold rating due to the sector headwinds and limited growth potential at the time. Since my last coverage , THQ has traded lower as the rest of the market indices continue to pull back from their all-time highs. However, the fund has released an updated annual report, and I believe there are some growth catalysts that can lead to attractive total returns as interest rates trend lower. Therefore, I wanted to revisit the fund to provide some updated insights into its performance and potential for a sustainable source of income generation. Following the recent pullback in share price, the fund now trades at a small discount to NAV of 1.71%. However, this is a bit smaller than the discount to NAV of 2.7% at the time of my last coverage. Referring to the red line on the graph below, we can see that the fund still trades at the higher end of its price-to-NAV range. However, I believe that management's decision to raise the payouts back in 2024 helped artificially to deflate the price-to-NAV discount. Looking forward, I believe that lower rates and an expanding GLP-1 market will serve as catalysts over the next twelve months. CEF Data THQ now offers a dividend yield of about 13% and issues its payouts on a monthly basis. However, the recent annual report indicates that the fund struggled to generate earnings that could actually support those payouts. As a result, THQ's underlying NAV has declined year-over-year. If the fund continues to pay out more than it earns, I believe there is still more downside risk, especially since the fund uses a moderate amount of leverage. Therefore, I wouldn't be against a reduction of the distribution to help the fund's performance improve. Fund Strategy According to the latest fact sheet , THQ has total managed assets of $1.02B that are spread across a diverse range of healthcare-focused positions. The fund tak...