Monday, January 28, 2013
Happy New Year!
2012 was a good year for the US market overall. And I have a good feeling about 2013.
I'll start the year by summarizing quarterly results from two of my largest holdings: Microsoft (MSFT) and Wellpoint's (WLP).
MSFT earned $0.76 a share versus $0.79 a year ago. The company did post record revenue of $21.5B. But some of that was the effect of deferred recognition of Windows 8 revenue. If we average out the last two quarter to nullify this effect, the revenue is $37.5B for the last six months versus $38.3B a year ago. So Windows 8 is not giving a big enough boost to MSFT. In fact, Windows sales is down for the six months compared to last year. Along with lackluster sales is increased marketing costs associated Windows 8. Still, I rate MSFT earnings as decent because this is a slow year for computer sales.
And I said in my earlier MSFT post, I don't expect great things from the company. I only expect them to hold ground against competitors like Apple in OS and mobile device makers running on Android or Apple's IOS. And right now I see MSFT doing just that, and my sentiment now is hold.
Wellpoint (WLP) earned $8.18 per share for the 2012 year, which was slightly better than consensus. This earnings was with certain special items. Without that earnings was $7.56. I feel this is great for a stock trading at $66 but fantastic when it was at $53 just a few months ago. I am not surprised that it is at $66 today. I stated my positives views on WLP in an earlier post. At that time, Obama wasn't yet re-elected and therefore Obamacare wasn't certain to stay. With Obama subsequently elected, WLP did drop about 10%. But now, that keen-jerk has reversed itself.
I feel both MSFT and WLP are solid large cap stocks. Their valuations will be fundamentally correlated to the US market overall, but they also have a undervalued bent. So I expect them to beat the US market overall with little risk.
Any other holders of these two companies out there? Please let me know your comments.