What The “Microsoft Corporation Indicator” Says Now

wall-street-etfMitchell Clark: Earnings estimates for Microsoft Corporation (NASDAQ:MSFT) are going up and the stock, which recently accelerated, finally looks like it has broken out of a 13-year consolidation.


Microsoft has been an income play for quite a while. Currently yielding three percent, the company’s forward price-to-earnings ratio is around 12.5 and is not dissimilar from many other blue chips.


Then there’s Intel Corporation (NASDAQ:INTC). This company has been struggling for capital gains, but it’s yielding 3.6% and isn’t expensively priced.


What these technology companies illustrate so well is the business cycle, both in terms of operational growth and also as equity securities. Getting the cycle correct (the right place/stock at the right time) is the toughest thing for any investor or businessperson.


Regarding stocks, both Microsoft and Intel’s long-term charts clearly show how extremely overpriced their share prices were during the bull market of the 90s. Intel’s long-term stock chart is featured below:


INTC Intel Corp. Nasdaq GS Chart


Chart courtesy of www.StockCharts.com


The benefit of the very long term is that it provides a normalized but still decent rate of return with these kinds of stocks. No enterprise or investor can escape the business cycle, whether it is industry-specific, a local reality, or the general economy.


Railroad stocks have been super hot over the last several years, but for long periods of time, they were not. The solid dividend-payers that they are, you’d be hard-pressed to find Union Pacific Corporation (NYSE:UNP) competing with Apple Inc. (NASDAQ:AAPL) or Google Inc. (NASDAQ:GOOG) for headlines.



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