You have enough fund for buying 1000 shares of common stock of any publicly traded company. Assume you want to invest in Microsoft Corporation. Justy your investment in Microsoft Corporation? why would you buy microsoft but not others? Use the data for upto at least five years to defend your answer. (The ticker for Microsoft is MSFT)

I am working on this project. Any ideas from finance majors or others?

As the investment community is globalized, start with the country analysis. Then study the different industries withing the country. The analyze the different companies within the industry. Finally, remember, you invest in a company not because it's good company but because you believe that it is underpriced.

I am not a finance major but as an investor I wouldn't really invest on MSFT because they have pretty much reached their growth period. But if you want a safe and secure investment, MSFT is one of them as the company has a solid history and is the industry leader in the business it is in. For the purpose of your paper, some data you can use to back your points would be the dividned it pays on it's common stocks and it's 5 years expected growth is higher than any of its competitors.

I am not sure how your paper will be graded and what are the criteria but I would focus on how and why MSFT is a better investment compare to its competitors. Because if you were really investing too, first you would find an industry you think has a future for positive return on your investment and then you find the industry leader in that business or choose the company that is not the industry leader right now but will be 5 years from now. In the case of MSFT I don't see why anyone would argue they won't still be the industry leader 5 years from today.

Well....hope it helped. Good luck.

one good thing about msft is that it pays dividend. plus it's a monopoly. and is expanding into other businesses, like gaming and enterprise solutions. plus they have a lot of smart people working for them. linux is their biggest nightmare.
there are two types of investors - chartists and fundamentalists. chartists look at the stock time series (history) and other metrics and predict future prices. fundamentalists look at teh economic/business fundamentals, like market size, potential for new growth, competition, current and historical cash flow, etc. to determine if the company's PE ratio is justifiable. msft is a good pick, imo. mainly cos its a monopoly and cos they a lot of smart ppl work there.

Newlynew and hukka nepali thank you very much for your insights about the investing decision.

Regarding the grading of my paper: it will be pretty much based on the usage of historical data and comparisons which should not exceed 2 pages. Always helpful to use supportive graphs and charts. As to my knowledge i can u dividend payout ratios , growth ratios and earnings . What other things can i use to help support my investing decisions? I cannot simply say that- i am going to invest in microsoft because its a good company and i like their windows software or because bill gates is the richest man in the world. It has to be proved. or say,,, has to explain to a person who knows bit about finance....but not in depth.

my teacher made a joke: she said she had one paper written last semester which included.........the student was doing research on some kind of jeans company (i don't remeber) and in her paper she wrote i like to invest in that company because that jeans make my butt look good. the other paper, a student wrote ----i like to invest in coca-cola company because it taste good............ just jokes or reality of the paper don't know!!!

anyway, i need to explain based on the data and company history and justy investing in microsoft is fruitfull.

Newlynew and hukka nepali gave me good ideas..........anymore ideas please?... and once i finish my paper , i will post it here in sajha so that other sajha people can have idea of investing.

wish me luck and help me.

liljohny

thanks to zalimsingh too.....

your ideas seems justifiable.

Caculate ROI and Risk Factor using last five years data..It will easily justified why you want to invest on microsoft.

Also look at corporate governance of MS. See if it is accountable to shareholders...

You can do a regression of the past returns of MS with the equity index to see if alpha is high and statistically significant. This will indicate it is under/overpriced.

Thsi question is so damn dumb. Anybody who invests in only one company is just gambling. Diversify your portfolio, nigga, as Wu Tang would say it.

dude thugged out................you are not going through the thread in detail... go through it in detail before u reply ..(for future reference). Just to remind you....this is not something that some one is making a real investment decision that they are investing their all fund in microsoft....its a class project in which you have to justify why you might wanna include microsoft in your porfolio? thats about it...anyway just headsup....

newlynew, you seem more knowledgeable in this issue.... can you please tell me how to calculate the regression...(i know i did in stat) but not in finance yet....? or can u post a formula or procedure to calculate regression to find out under/overpriced of the shares, please? your informations are very helpful right now...

thanks again.

Good idea Liljohny:

you want sajha members to do your HW and you party, right?? It's friday I know, buddy. Good luck! Kind a cleaver guy, but don't rely anyone's answer to invest in MSFT though.
If someone does your HW at leat read em'

purush

Mr purush:

Regards from liljohny at first.

I am just wondering ---why don't you let people share their ideas (if you yourself cannot contribute to the subject matter)?

Its not like i am having sajha people do my homework dude...i am not that creepy! and FYI this is not my typical homework (like you probably did in english 101 0r 102), it something research oriented? so, i take posting on sajha as one of the methods of research. I just thought , there might be (and there is) some people who are introduced in this subject matter. And i don't think, gathering ideas about something related to study, is a crime or matter of social harm, unless you don't contribute at all.

so, if you are unaware of the subject matter just ignore it. you are not required to reply each and every thread posted, unless you are successfully unemployed.

keep posting guys, ignore the distractions.

The stock seems to be neither undervalued nor overvalued. After the tech bubble burst(MSFT was selling at about 60 in 2000), most people panicked and started selling their shares in boatloads. The result, the company's shares plummeted.. P/E of 22 is quite descent. Dividend isn't that good if you ask me. If you wanna capture dividend, try some other company that pays descent divident. Income statement shows that their net income was 12 million for period ending jun, 05, compared to 8 million for year ending jun, 04. Furthermore, a new operating system is coming out soon. Although Xbox 360 doesn't seem to do be doing that well, I don't think it'll be a bust. Earnings will be good this year for sure.
However, PEG is 1.59, Price/Book is a whopping 6.34. P/B is wayy too high. BTW, their return on capital and profit margin seem to be very high, which is good. ROA and ROE are both about 10%. That's good news. Earnings growth is at 5%. That's good news.

I would say it's gonna give you about 15% return, max. But damn, book value per share is at four dollars. P/B is way too high. That scares me.
The only reason I see anybody would buy MSFT is because from what I understand a new operating system is coming out. That means good business. Nobody can live without MSFT's operating system. Google might try to challenge them though, but that'll be pretty difficult. And they're not gonna be challenging them this year. People are becoming very cognizant of some of the glitches that Windows seems to have. So Unix is cutting on the profit

Overall, I rank MSFT 6/10.

That was the fundamentals. If you look at the technicals, MFI(1 yr) seems to be at about 40 or so. RSI is approximately 50. 100 day MA seems to be bullish, IMHO. 20 day MA seems to show no real pattern. Furthermore, bolinger band seems to show that MA is smack right between the upper and lower limits. Okay, MSFT seems to be on the fence. I'm a bit iffy on this one. Hard to make judgement. The only good reason is the operating system coming out soon, AND also Xbox 360. That's the best reason. Fundamentals and Technicals seem to be neither good nor bad. Volume also seems to be down. Hmmm.
So you'll have to speculate. Graham would pass on this one.

Mr. Liljohny dude:

first of all, I am in undergrad here so I don't know about Eng 101 or whatever. You are seeking two-page report in this Sajha, that's weird. As you have already seen that people saying do regression analysis and things, and you want them to do regression and post the conclusion. What the hell is that???
Anyway, if you are that much interested to do regression, I can provide you with the techniques how to do that.
Download the daily stock price of MSFT for a given period, you might want to use for around 250 days (use can download it from finance.yahoo.com). Then also download the NASDAQ composite index in another column. Calculate the daily stock return of MFST and market [(P1-Po)/Po].
Now you are all set to run a regression. In Excel, Go to Tools: Data Analysis: Regression. Identify the daily stock return of MSFT as Y variable meaning dependent variable and market return as independent variable (X).
I am hopeful that you know how to use excel. If you are really doing research, read the following articles as to how to calculate and use daily stock return for your study.

Brown, S.J. & Warner, J. B. Using Daily Return: The case of event studies. Journal of Financial Economics, 14 (1985) 3-31.

Brown, S.J. & Warner, J. B. Measuring Security Price Performance, Journal of Financial Economics, 8 (1980), 205-258.

I mean, I am not an undergrad.

Analyst opinions vary because there is much qualitative work. Analyzing a company and a company's stock are two different things. Here's why:
1. The question of long-term and short term profits cme into play. Theoretically, long term could mean forever as a corporation never dissolves. As John Maynard Keynes said, "In, the long term, we're all dead". Profits are always for the short term. Warren Buffett may have earned his millions through long term holding but remember those were the times of "investors". Not hungry day traders and huge trading firms with high speed ECN access. Analyzing stock involves analyzing a company, true if stock price truly resembles company performance. My own personal research suggests stock price mostly over-estimates compan value, reason?- IRRATIONAL EXUBERANCE. With regards to microsoft, if one were to buy microsoft, one would have to look for "seasonal" movements in prices. That by practice would be a very short term horizon. It's revenues go down right after christmas season, (as it did last year because they initially lose money on X-Box.). So short the stock in the suceeding quarterly season. Right before the annual report comes out, which im not sure if it coincides with december 31st, buy it, stock goes up 8 or 9 points, sell the baby and go fish for cisco and Apple.

2. Even if company analysis revealed that microsoft was a hidden gem(after all these years?), it'll take a looonnggg time before market actually pays attention to it, because remember the most fundamental rule: market paritipants already have all the necessary information about a stock price instanteniously. But why does it take for the market to react to msft long term? It's because it's not quite the market pariticpants who have instantenous info, its the insiders. Research has shown that there IS substantial movement in stock oprice few days before the release of earnings. So the market "pariticipant" is already a loser in the game of money. My reccomendation: go seasonal, instead of spending hours on 2 years of data, spend hours on company's cyclicality. Look at the industry and anticipate its next move. Dont buy and hold, buy and sell and go fish for some more. I've done simulated investing that way, works wonders.
i know this info wont help anyone preparing for an academic paper. Me's just a kiddo, but you never know who has the true feel for the market eh?

Mr Purush:

Accept my apolozy for underestimating. I had to write that because lot of people write whatever comes in mind even though they are not aware of it. So, i might have a problem of what we call "hasty generalization". I was wrong.

However, your information in helping me right now. i am trying to find those article in the web. i haven't tried at our univ library yet. But i want to u assure that i am not making sajha people to do my homework. Its a part of homework, but research oriented. 2 pages????? well, i didn't put it the way i wanted to. what i was saying was, the summary has to be within 2 pages...........but i can show all the graphs and calculations in how many pages i want to. so, hope i will be able to conclude in 2 pages. other thing,you said you are a grad student................what is your major? or which university? ( i am not trying to get into personal matters , you can reply me through sajha email if you LIKE TO.....).... i started the thread for MBA/PHD in finance...but that thread is not moving with informations......so, i am just looking for more informations about the grad finance programs.......

anyway, your and all others infos are helpful.

thanks again

Thanks Liljohny:
Actually I am doing my MBA with finance and accounting concentration. It is not in that good university that I should mention. It is one of the ok (thikai) university. I was initially thinking to get just a finance major. Later I realized that accounting has more saleability than finance as I was receiving phone calls from prospective employers that they were looking for US citizens for the positions.
I love finance than accounting, but for the sake of secured future, I am kind of taking more accounting courses and planning to take CPA. After working for 2/3 years, I am eventually planning to go for a PhD in Finance as well.
Hopefully it will work out good.

hey purush:

can i contact you through email or something?

your field seems to fit my interest. as a matter of fact, i am doing undergrad in accounting and finance.... and planning to go for masters in finance.... so, maybe i can take some advice for further.....

just thought i might be better off getting advice...

let me know what do u think

thanks again

No problem, buddy. Go ahead and shoot a e-mail. I will be happy to answer anything that I can. However, I do not think that I know that much about finance job market and prospects.
Anyway, I will be more than happy to share my experiences rather than to provide u an advice.