A Cheap Strategy to Play Microsoft
Below is a MRR and PLR article in category Finance -> subcategory Stock Market.
A Smart, Affordable Strategy to Invest in Microsoft
Introduction
Investing in Microsoft (MSFT) offers a unique opportunity, especially for those interested in leveraging options to play the stock without a hefty upfront cost.
The Situation with Microsoft
While Bill Gates's legacy in creating a tech giant is undeniable, Microsoft has faced challenges since 2002, with its stock dipping from $35. The tech behemoth, with a market cap of $242 billion, struggles with growth due to its sheer size. However, Microsoft remains a robust long-term contender, boasting $34 billion in cash, or $3.28 per share. This financial flexibility allows the company to explore growth avenues, such as a $1.1 billion investment in R&D for its MSN Internet unit and potential partnerships with companies like Yahoo to rival Google in digital advertising.
Valuation and Potential
Microsoft's projected five-year earnings growth rate is a modest 12%. Trading at 16.30 times its estimated FY07 EPS of $1.44, the stock isn't overpriced. The PEG ratio stands at 1.51, but factoring in the cash per share lowers it to around 1.0, reflecting a fair valuation. If Microsoft's growth rate improves, this could further enhance its value.
An Innovative Investment Approach
At its current price, Microsoft deserves attention. If purchasing a 100-share block for $2,347 seems steep, consider exploring long-term options, or LEAPS. For instance, an in-the-money January 2008 $22.50 Microsoft Call LEAPS, expiring on January 18, 2008, is available for $380 per contract (100 shares).
This strategy allows you to participate in Microsoft’s potential upside over the next 20 months with a maximum investment of $380. The breakeven is $26.30?"any gain beyond this point translates to profit. If the stock underperforms, your risk remains limited to your initial $380 investment.
Final Thoughts and Caution
While options like LEAPS offer intriguing opportunities, they also carry higher risk. It’s crucial to consult with an investment professional before engaging in any options strategy.
Disclaimer: This example is illustrative and not an actual investment recommendation. Always seek professional advice when considering options investments.
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