Investors say ‘safest’ software play Microsoft is cheap at current level
Investors said on CNBC Wednesday that “Magnificent Seven” titan Microsoft looks cheap at current prices. Microsoft, down 15% this year, is the largest stock swept up in the broader sell-off plaguing the software sector. Wall Street has grown increasingly fearful that artificial intelligence could disrupt these companies. MSFT YTD mountain MSFT YTD chart But investors who participated in CNBC’s ” Halftime Report ” on Wednesday challenged this view. Both Steve Weiss, chief investment officer of Short Hills Capital Partners, and Bill Baruch, founder and chief investment officer of Blue Line Capital, recently added to their positions in Microsoft. “In terms of Microsoft, they’ve been in front of this,” Weiss said of any potential change in its business from AI. “They were early investors in OpenAI. Could you see some damage? Yes, but I backtrack from them being the biggest beneficiary of AI to them being neutral to slightly positive. And that means the stock is extraordinarily cheap at these levels.” The investor shared that this latest move has taken Microsoft from a small core position to a full-size core position in his portfolio. Baruch added that Microsoft is currently trading two standard deviations below its long-run price-to-earnings ratio, which he sees as a big support level. The recent slide “is going to prove to be a long-term buying opportunity … I think it’s time to start thinking about getting Microsoft to weight or near weight in your portfolio,” he said. “The flows that are coming out of software now have to come back in.” Joe Terranova, senior managing director for Virtus Investment Partners, also advocated for CEO Satya Nadella’s company. “It’s a proxy for OpenAI, just like Softbank is. If you believe there’s stability in the software names, this is the safest play,” he said. “If software is going to have a recovery rebound, Microsoft is going higher.” Terranova added that while some investors are concerned about the sustainability of growth at Microsoft’s Azure business, he believes such fears are unfounded.
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