Financial Management: Microsoft Corporation Stock (Research Paper Sample)
Imagine that you are a financial manager researching investments for your client. Use the Strayer Learning Resource Center to research the stock of any U.S. publicly traded company that you may consider as an investment opportunity for your client. Your investment should align with your client’s investment goals. (Note: Please ensure that you are able to find enough information about this company in order to complete this assignment. You will create an appendix, in which you will insert related information.)
The assignment covers the following topics:
Rationale for choosing the company in which to invest
Stock price analysis
Refer to the following resources to assist with completing your assignment:
Forbes – “Six Rules to Follow When Picking Stocks”
CNN Money – “Stocks: Investing in stocks”
The Motley Fool – “13 Steps to Investing Foolishly”
Seeking Alpha – “The Graham And Dodd Method For Valuing Stocks”
Investopedia – “Guide to Stock-Picking Strategies”
Seeking Alpha – “Get Your Smart Beta Here! Dividend Growth Stocks As ‘Strategic Beta’ Investments”
Market and Company Information
U.S. Securities and Exchange Commission – “Market Structure”
Mergent Online (Note: This resource is also available through the Strayer Learning Resource Center.)
Seeking Alpha (Note: Also available through the Android or iTunes App store.)
Morningstar (Note: You can create a no-cost Basic Access account.)
Research Hub, located in the left menu of your course in Blackboard.
Write a ten to fifteen (10-15) page paper in which you:
Provide a rationale for the stock that you selected, indicating the significant economic, financial, and other factors that led you to consider this stock.
Suggest the primary reasons why the selected stock is a suitable investment for your client. Include a description of your client’s profile.
Select any five (5) financial ratios that you have learned about in the text. Analyze the past three (3) years of the selected financial ratios for the company; you may obtain this information from the company’s financial statements. Determine the company’s financial health. (Note: Suggested ratios include, but are not limited to, current ratio, quick ratio, earnings per share, and price earnings ratio.)
Based on your financial review, determine the risk level of the stock from your investor’s point of view. Indicate key strategies that you may use in order to minimize these perceived risks.
Provide your recommendations of this stock as an investment opportunity. Support your rationale with resources, such as peer-reviewed articles, material from the Strayer Learning Resource Center, and reviews by market analysts.
Use at least five (5) quality academic resources in this assignment. Note: Wikipedia and other similar websites do not qualify as academic resources.
Rationale for choosing Microsoft Corporation Stock
While among the big cap tech companies, Facebook, Aazon, Netflix, and Alphabet have received more attention among investors because of their growth potential, Microsoft (MSFT) is a safe bet even in times of volatility. Microsoft will likely experience steady growth albeit at a slower rate than some of the tech stocks. The company has had consistent financial improvement in the past five years and a growing dividend. Furthermore, the tech company has more diverse product lines and even as the Lumia Windows smartphones have not been a success, the company has huge cash reserves, which can fund the acquisition of other tech firms and startups.
Finance managers need to take into consideration their clients’; need and potential for growth and other factors likely to affect a company’s stock, Microsoft’s steady performance remain one of its biggest advantages. The tech stocks have been some of the most popular in the past decade since the U.S. economy rebounded from the 2008/2009 global financial crisis, but they are also volatile. Nonetheless, Microsoft has mostly experienced steady growth and the company’s business model is profitable (Yahoo finance, 2018). Microsoft entry into the cloud business is an opportunity to increase the company’s profitability and diversify its products and service. Even as the share is selling at a premium there is still potential for growth, and even if the share price fall, it would be prudent to hold the stock for the long term rather than sell.
Expanding into the cloud computing business and not merely concentrating on the software business has improved the company’s prospects, and the management has shown willingness to adapt to changing market conditions. Nonetheless, the company’s dominance in cloud services does not necessarily indicate that the company has a sustainable competitive advantage as other companies also expand their cloud business services (De Oliveira, 2017). As such, Microsoft is more of a long term buy stock, as the company’s long term strategy will improve its competitiveness even when the software market landscape changes. Having a diversified revenue strategy reduces risk and when compared with the major tech firms. For instance, Alphabet (Google) and Facebook mainly get their revenue from advertising, Amazon from e-commerce and Apple from gadget sales.
Selected stock as a suitable investment for client and client’s profile
Finding out the clients’ investment preference, needs, and appetite for risks is necessary to make appropriate investment decisions and helps to meet their financial goals. The client is a middle aged male prefers middle-term and long-term investments, which are less volatile stocks and looking for long-term growth. Microsoft first reported that the company would start paying dividends in 2003, and paid in 2006, and has consistently distributed dividends to the shareholders. In the past five years, Microsoft’s dividend payments have outperformed the S & P 500. Furthermore, the dividend growth rate for Microsoft makes the stock a long-term hold, where tech firms like Netflix are mostly growth stocks. The income was $21.2 billion in the year ended June in 2017 compared with $12.2 billion on June 2015 (Yahoo finance, 2018).
In addition to its own business, Microsoft has diversified to obtain income from the business sector or online services, the company has multiple investments in entities from various sectors. Microsoft's investments are not always in companies close to its tech business market, and diversification improves the company’s the financial strength, even as it has lost ground in the consu...
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