Raptors, Big Cheap Tech selection number three is Microsoft Corporation (MSFT).

music selection: “Man On The Silver Mountain (Live)” — Dio

MSFT has become a cash gushing giant.  P/E is nominally under 20, P/B is under 5, and P/S is under 4.  Current yield is 2.6%.  But these numbers don’t tell the whole story as with a lot of big tech names, there is a lot of cash to consider.  Big Softy has 95.4 billion dollars in cash and short term securities on the balance sheet.  Are you kidding me?  That is very nearly a quarter of the market cap.  Long term debt of 27.644 billion is more than covered.

There is over 26 billion dollars in annual free cash flow coming out of this volcano of shareholder returns.  Eight point eight billion of that (and growing!) is returned as cash distributions.  An additional 6.7 billion is returned in the form of share buybacks.  MSFT is borrowing cash but with net debt at less than zero there is no actual leverage.  Instead, the company is effectively shorting the bond market at its bottom.  A wise move.  There is a lot of safety here.

The 47.50 strike 10JUL2014 put is currently going for 1.10 a contract.  That yields 22.24% annualized on capital at risk for 38 days.  You can outpace Warren Buffet without buying a risky high multiple microcap?  Yuprawr!  The choice is clear.

Devour your prey raptors!

Write Puts on Big Cheap Tech Part 3 of 5

Never miss another opportunity to devour prey!

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4 thoughts on “Write Puts on Big Cheap Tech Part 3 of 5

  • June 4, 2015 at 6:29 pm
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    I like the stocks in your tech series — QCOM, INTC, and MSFT. All are solid ones. I planned to write a LEAPS put on QCOM later.

    Thanks for sharing.

    Reply
  • June 5, 2015 at 11:48 am
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    I have found that selling options, rather than buying them, works best for me. Or sell a naked PUT on a stock that you wanted to buy anyway.

    Good luck with the options. I have had good luck with them, but it’s a LOT less work to just buy S&P ETFs… And in the long run, just as much money.

    Reply
    • June 7, 2015 at 9:04 pm
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      Indexing to the S&P is a fine strategy. I think you will do well.

      Reply

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