We recently published a list of Jim Cramer November Portfolio: Top 10 Stocks. In this article, we are going to take a look at where Microsoft Corporation (NASDAQ:MSFT) stands against the other stocks in Jim Cramer’s November Portfolio.
Stock markets are roaring amid Donald Trump’s victory. Jim Cramer, who has long believed that Trump’s presidency would bode well for the stock market, earlier this week discussed the market’s reaction when chances of a Kamala Harris win were apparently rising. Looking back at Cramer’s analysis in hindsight gives us a nice overview of what groups of stocks could rise in the coming weeks and months.
Jim Cramer on Monday evening analyzed what caused the market to dip as of the closing session. Cramer believed the chances of Iowa turning blue spooked some market circles on various assumptions:
“Let’s start with the most incredible reactions, the bond market. Interest rates went sharply lower today. Now, see, I’m so used to higher, to interest rates going higher in a Democratic win, that this took me by surprise. It’s completely out of character. But the bond market is steep, and its judgment is not made on a whim. There had to be billions of dollars invested today on rates going lower if Harris wins the election. I find that astonishing.”
Cramer then talked about different groups of stocks that moved based on the sentiment that Harris could win this election. Housing stocks rose because the market is bullish based on potential subsidies if Harris wins. Tech stocks, however, fell, and Cramer explained the reason behind that:
“(hyper scalers and tech stocks) traded horribly today. What does it say? It says the traders are betting that Harris will stand by Biden’s FTC and antitrust appointments who are known to be anti-the hyper scalers,” Cramer added.
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Our Methodology
For this article we watched some latest programs of Jim Cramer and picked 10 stocks he’s talking about. With each company we have mentioned its hedge fund sentiment.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
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Microsoft Corp (NASDAQ:MSFT)
Number of Hedge Fund Investors: 279
Talking about Microsoft Corp (NASDAQ:MSFT) earnings results, Jim Cramer said in a latest program that the company’s guidance seems to be conservative and the stock fell mostly because traders bought it after headline numbers but sold after the company talked about detailed numbers during the earnings call:
“For as long as I’ve known Amy Hood, and that’s probably about three decades, she’s been conservative in giving outlooks. That’s her nature. It’s a big reason why she’s so great at her job. She never overpromises. She’s more than likely to deliver on her projections. If you look at her body of work, that’s what she has done over and over again. Incredible track record.”
Cramer also praised Microsoft Corp (NASDAQ:MSFT)’s growing market share in the enterprise space:
“They will have total dominance of AI in the enterprise market, a remarkable feat, and they did it in about a year’s time. You may want to say that’s not worth anything and lock in some gains. I say fine.”
Microsoft Corp (NASDAQ:MSFT) shares recently fell after the company reported its latest quarterly results. Analysts believe most of the revenue beat came from PC segment, while investors were paying more attention to AI and Azure. Azure’s 34% growth met expectations, though guidance for next quarter fell short, projecting between 31% and 32% growth—1 percentage point below forecasts. This dip is attributed to delays in data center capacity from third-party providers, though Azure’s consumption trends remained steady.
Investors hoping for a rebound in IT spending were likely disappointed, as stable Azure consumption suggests no significant uptick in the second half of the year. In addition, the lower-than-expected Q2 guidance underscored tempered growth expectations.
AI services, however, contributed a robust 12 points to Azure’s growth, a steady continuation from the previous quarter. Microsoft’s management confirmed strong demand for AI services, although supply constraints are limiting further expansion. Microsoft Corp (NASDAQ:MSFT) anticipates AI-related revenues, including M365 Copilot and Azure AI, could reach $10 billion annually by next quarter—making it one of the fastest-growing segments in Microsoft Corp (NASDAQ:MSFT)’s history.
Baron Opportunity Fund stated the following regarding Microsoft Corporation (NASDAQ:MSFT) in its Q3 2024 investor letter:
“Microsoft Corporation (NASDAQ:MSFT) is the world’s largest software and cloud computing company. Microsoft was traditionally known for its Windows and Office products, but over the last five years it has built a $147 billion run-rate cloud business, including its Azure cloud infrastructure service and its Office 365 and Dynamics 365 cloud-delivered applications. Shares gave back some gains from strong performance over the first half of this year. For the fourth quarter of fiscal year 2024, Microsoft reported a strong quarter with total revenue growing 16%, in line with the Street; Microsoft Cloud up 22%; Azure up 30%; 43% operating income margins; and 36% free cash flow margins. Core Azure growth came in one point shy of expectations, however, due to a soft European market and continued constraints on AI compute capacity. In the same vein, while Microsoft reiterated its fiscal 2025 targets of double-digit top-line and operating income growth, quarterly guidance called for Azure growth to slow a bit before accelerating in the back half of the fiscal year, as capital expenditures increase, yielding an expansion of AI compute capacity. We believe this investment is a leading indicator for growth, with more than half of the spend related to durable land and data center build outs, which should monetize over the next 15-plus years. We remain confident that Microsoft is one of the best-positioned companies across the overlapping software, cloud computing, and AI landscapes, and we remain investors.”
Overall, MSFT ranks 2nd on our list of the stocks in Jim Cramer’s November Portfolio. While we acknowledge the potential of MSFT, our conviction lies in the belief that under the radar AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than MSFT but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
