Rising fund ownership in a stock is considered bullish.
And when the increase includes top funds, an investor needs to
ask: Is this stock a buy?
) might seem like an unlikely candidate to fulfill both of the
above requirements. For the fast money crowd, Microsoft is often
regarded as a has-been: a once-great growth story turned
Yet from Q4 to Q1, funds' stake in Microsoft rose about 2% --
not insignificant when you consider the overall stake is about
3.2 billion shares. Quality funds opening or adding to their
positions in Q1 included Janus Contrarian Fund , which put 3.5%
of its portfolio into the stock, and Fidelity Contrafund , which
increased its stake by a third.
Overall, 70 funds rated A+ by IBD either opened, increased or
held steady their positions while 18 A+ funds lightened their
stake and two exited the stock entirely.
What's behind the buying?
Microsoft's new CEO might be part of it.
On Feb. 4, Satya Nadella succeeded Steve Ballmer. Since then,
the stock has risen 14%.
Ballmer said in November, before a new CEO was named, "At the
end of the day, we need to break a pattern. Face it, I'm a
While nobody expects Microsoft to go back to the go-go late
1990s when annual earnings jumped 35% to 56% and revenue rumbled
28% to 46% higher, Microsoft's recent performance has room for
Earnings per share increased 3% and 1% in fiscal 2012-13 while
revenue rose 5% and 6%. The Street expects EPS to slip 1% this
fiscal year, which ends in June, and pick up to 6% growth.
Revenue estimates are 10.7% and 16.6% for 2014-15.
The dividend is one of Microsoft's bright spots. The
annualized dividend yield is 2.7%. The quarterly payout has more
than tripled since mid-2006.