Profit from the bear market with Microsoft stock

It’s official. last week Standard & Poor’s 500 Joined Nasdaq Composite It fell solidly into bear market territory, which means it’s down more than 20% from its recent high. For many investors, it is unnerving to be in the midst of a crashing market. It seems that every day there is depression, depression, and another “expert” who has another hot opinion about why it has gone down and when it will return.

What you need to know is that no one knows when the economic downturn will end. The best guarantee we can give is that Will end. When the bull comes back, you need to be ready to take it by the horns. Long-term investors can use a bear market to their advantage. After all, good investors don’t want to buy high and sell low, do they?

Let’s look at the qualities you are likely to find in a bearish stock that will help it rise again. Qualities like earnings, cash flow, seasoned management, and growth opportunities come to mind. Microsoft (MSFT 2.26%) All of these things are in spades.

Microsoft has seasoned management in troubled times

Microsoft CEO Satya Nadella heads a team that has done an impressive job recently. We just need to go back to March 2020 to see this leadership in action. With significant economic uncertainty, Microsoft reported record operating revenue and profit for shareholders.

Data source: Microsoft. Scheme by the author.

The company capitalized on these gains during the first three quarters of fiscal 2022 (Microsoft’s fiscal year ends in June). One of the biggest testaments to a well-run organization is its profitability. Microsoft is making huge profits and continues to increase its margins, as shown below. for comparison, the alphabet It posted an operating margin of 31% in 2021 – a very successful year for the company.

Microsoft . operating margin

Data source: Microsoft. Scheme by the author.

Microsoft’s management team has proven its ability to overcome our current economic challenges.

Microsoft has its head in the clouds

Microsoft continues to dominate the software industry with its flagship Office and Windows products, but its future lies in the cloud. Spending on cloud infrastructure is on the rise, and is expected to grow by 20% this year, according to Gartner. Microsoft Azure Cloud Infrastructure Platform Battles to Dominate it AmazonAWS.

This sector is very profitable. Microsoft’s Azure and other cloud services segment grew an astonishing 46% year-over-year in the last quarter to align with the company’s 29% growth in the company’s server and cloud products. In all, the intelligent cloud revenue stream generated $54.3 billion of Microsoft’s $146.4 billion in sales during the third quarter of fiscal year 22.

Another great advantage of Microsoft is that the company never allows itself to stagnate. Instead of being satisfied with the latest results, the company announced its acquisition of Activision Blizzard (ATVI 1.04%) for $69 billion earlier this year.

Activision will bring popular game franchises such as Call of dutyAnd the candy crushAnd the StarCraft. It would make Microsoft the third-largest gaming company by revenue if the deal gets regulatory approval. These impressive campaigns in cloud computing and gaming make Microsoft a leader in two other rapidly growing areas.

Microsoft achieves its lowest rating in years

Microsoft’s stock is not immune to the market swoon, although its results are still excellent. The stock is down more than 25% this year. This has brought the P/E ratio to its lowest level since the March 2020 crash, and prior to that in early 2019. Meanwhile, earnings continue to rise, as shown below.

MSFT PE Ratio Chart

MSFT PE percentage data by YCharts

Investors can also get small but increased profits. The company’s profits have increased annually since 2006 and is generating around 1% revenue at present.

No risk-free stock as recession fears still loom, Microsoft stock could continue to fall along with the market. It is unlikely that a stock will catch at the lowest price; Predicting this accurately is almost impossible. An additional buying strategy, such as dollar averaging, is an excellent way to mitigate market risk in the short term.

Microsoft has all the qualities that investors look for in a long-term winner and they launch it all. The stock has rewarded long-term shareholders for years, which looks set to continue once the bear returns to hibernation.

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