Buying a stock near the highs is frequently a poor investing decision. It not only diminishes the margin of safety but also reduces the potential return. With a lower margin of safety, an investor may unnecessarily invite losses and face the troublesome risk that the investment may not perform according to his expectations.
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MSFT is one such investment at all-time highs. Microsoft surpassed my expectations and hit the target in just 4 months. To serve this purpose, I will use a technical price chart and fundamental information taken from various sources.
Is Microsoft Corporation (NASDAQ:MSFT) Stock A Buy Heading Into ?
The monthly MSFT price chart below clearly tells us that the stock is in a strong uptrend for the last four years and investors who entered near the lower range have been rewarded handsomely. This is as easy as it gets. The benefit of using the monthly price chart is that it diminishes the noise component and gives an accurate picture of the stock performance. As a bonus, the trajectory indicated by a monthly price chart is often sustainable in the long-term. Another reason why I refrain from recommending a buy at this point is because the stock is touching overbought territory on the monthly charts.
This is quite a rare phenomenon as can be seen in the year chart above.
The latest monthly RSI reading is at But, this clearly does not mean that the stock will immediately decline to this level; not unless the broader market topples. Instead, it can enter into a consolidation phase just like it did the last two times marked as green rectangles in the chart and remain flat for the next months. Many bulls watching this trend are also hoping for the stock to breakout on the upside. They base their belief on the conservative forward PE of This fact is highlighted by the historical earnings per share and the range of past estimates as well as the wide divergences in the estimates of future EPS.
This makes the task complicated for an investor since he is unable to ascertain if the future growth has already been baked into the price or not.
With such uncertainty staring at him, it is always helpful to look at the valuation metrics. I have presented below the year MSFT ratios, all of which except the price-to-owner-earnings tell the same thing: Microsoft is not a buy at this time. This enhances the possibility that the stock could provide below-average to no-returns in the next quarters.
Should You Buy Microsoft Corporation (MSFT) Stock? 3 Pros, 3 Cons | InvestorPlace
I exhort this simple mantra I use for my investing decisions: The best investing opportunities do not come from chasing, but rather from waiting.
The fundamentals are clearly stretched and limit the scope of higher future returns. Sitting patiently now for lower levels will not only improve the margin of safety in the investment but also greatly reduce the probability that the stock enters into a tiring sideways range after an investment has been made. T , Verizon NYSE: VZ , General Motors NYSE: GM , Qualcomm NASDAQ: QCOM , etc offering significantly higher dividend yields.
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Buying Microsoft At All-Time Highs? Here Is What You Should Know - Microsoft Corporation (NASDAQ:MSFT) | Seeking Alpha
Long Ideas Short Ideas Cramer's Picks IPOs Quick Picks Sectors Editor's Picks. Buying Microsoft At All-Time Highs? Here Is What You Should Know Mar. Summary Microsoft is a hold at all-time highs. Stock remains in a strong multi-year uptrend.
The stock might enter a consolidation phase. TradingView Another reason why I refrain from recommending a buy at this point is because the stock is touching overbought territory on the monthly charts. Want to share your opinion on this article?
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