Just Follow Microsoft

If you want to be the world’s largest market cap company all you have to do is produce consistent double digit earnings and cash flows and not get involved in any scandals and questionable business practices over the last five years. A statistic that is hard to pull off in today’s volatile world is the fact that Microsoft has beaten analysts’ expectations 19 out of the last 21 quarters without a whiff of scandal or troubling business practices. Much of the success is directed toward the leadership of CEO Satya Nadella who took the top seat in 2014 and wisely crafted a move into cloud storage software along with intelligent upgrading of the Windows franchise and an online productivity business called Office 365. The critical piece of the Microsoft’s consistent growth has come from its software segment called Azure which has held its own against Amazon in this enterprise leading cloud software that has cranked out double digit growth metrics over Nadella’s leadership tenure. Last Thursday, Microsoft reported another stellar quarterly report that left analysts scrambling for critical commentary. Once in a while you just have to give a company and its leadership a tip of the hat and say job well done.

While Microsoft certainly stole the quarterly reporting headlines last week Honeywell, Abbot Labs, and American Express also delivered strong report cards that should provide a necessary springboard to allow the stocks to continue finding investor support through the second half of the year. From my perspective I like the fact that we are seeing strong leadership in diverse companies in growth themes including technology focused industrial infrastructure, technology driven medical devices using deep learning in healthcare applications, and one of the world’s best brand names finding growth footing in a world of competitive financial/tech online operators. It is easy to see the important link toward the success of these global leaders; each has found an innovative technology driven new business practice application in diverse sectors such as industrial, healthcare, and finance that is powering their cash flows. Technology innovation is a necessary ingredient in most growth areas of the global economy today.

This week we will get into the heart of reporting season with the busiest reporting period. While I don’t expect every report to be as strong and memorable as Microsoft, I do believe most reports will standup to investor scrutiny and report passing grades that will be supportive for future stock prices.

Have a great week and stay cool,

Roger N. Steed

July 22, 2019

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