Microsoft: Time to adjust your position

On April 25th after a drop in Microsoft shares, I recommended to buy Microsoft. I got busy with a Project and didn't track the stock. If you had bought Microsoft then in 22-24 range, it is time to prune your position. I would take 1/3rd off the table. I think it is still expected to rise to about 35-37 over the next 12 months as the PE adjust itself to 22-23 time the Jun 2008 EPS at the current estimate of 1.7. I would guess Microsoft is going to exceed the analyst estimates. Here is the three avenues of growth as I mentioned in my prior posts.

1> XBox 360: Main growth driver for financial year ending June 2007. Achieved critical leadership position in second half of 2006
2> New Office and Vista: Main growth drivers for June 2008 and beyond as the system stabilizes and corporations start adopting the OS.
3> Windows Mobile: This will add revenues to both the financial yeas ending in June 2007 and June 2008. I expect to see the tide turning towards Windows Mobile in 2007 and the momentum coming in 2008.

So, why am I preaching to take 1/3 off the table. Two reasons.

1> I like cash more than paper money.
2> I think the broader market is going to fall (Yes I still feel we will drop below 11500) and microsoft is going to fall with it.

In fact, for advance players, I would expect you to have a put on broader market instead on selling.

I will elaborate on point 2 in my next post early next week. Till then Happy Thanksgiving and have a great weekend. I am now mostly cash except some shares of my employers and two international mutual funds in my retirement account. I might have put that money to some use if I had time to look for for some other international index funds.

Market Overview: I s*&^&%$ up

Okay, let me start my saying that I have been horribly horribly wrong about the market.

Normally, I am the most optimistic person in the group (my group have a blog Renewable Sources - Check in my profile) regarding the market and I still am in the long term. But, in the short term, I believe that Dow is way above what it should be and it will pull back to 11200-11500 within the next two quarters.

In fact, I have put my money where my mouth is by being almost all cash in my non retirement portfolio. I only own few stocks of my ex-employer and that too because I feel it is highly undervalued and is a right takeover target. More about that in another post. Last 6 months, I was busy with my day time consulting work followed by a 6-7 weeks travel to India to visit my family and Europe for work and learning french language. I didn't track the market on a regular basis last 2-3 months, but I was always looking for a pull back and keep a tab on it 2-3 times a week. There wasn't any big one to let me enter comfortably

I think market is just zooming up due to momentum and is not based on any solid foundation. Few reasons that I will elaborate in next posts

1> Weak Housing market
2> Slowing consumption
3> Hiring pull back by corporations

And like all things in life, these three will feed off each other to form a spiral down. I know the main points above have been in the press for a long time. I hope I will be able to create a concise story of what is going to happen that will result in a pull back of the scale that I am talking.