INVESTING: Microsoft a good bet to outperform market

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In the not-too-distant past, Microsoft was the most dominant company on the planet. In 25 years, it had spawned the world’s
richest man along with products that became as ubiquitous as water.

The glow is long gone today and the sense of never-ending riches in Seattle has probably disappeared
forever. But even an old dog can bring it home once in a while, and Microsoft may just be due for one
more day in the sun.

stock market is a truly amazing system in that it can see things before they actually happen. The market peaked in October
2007. No one was worried about tough times then. But the overall market obviously saw trouble coming before the experts or
the man on the street. It is for this reason that I spend my time watching the market itself and not listening to the human
noise around me.

In the
case of Microsoft, I can only speculate as to why it looks good today. Perhaps its new search engine, Bing, is taking
share from Google. Maybe consumers are shifting back to Windows after the recent onslaught of Apple. It could be that professional
investors are enamored with the safety of Microsoft’s cash hoard. The reasons will come with time.

My positive outlook for Microsoft needs to be put
into perspective using the current market environment. I think the next four months are going to be very
difficult for the stock market in general. I am not convinced new lows are on the way, but sharply lower
prices can easily be seen in the near term. The market has been on shaky ground the past six weeks, and that
has me convinced the March low started a bear-market rally as opposed to a bull market.

In bear-market rallies, months of gains can evaporate in days or weeks. It is simply too bad for
Microsoft that it decided to shine with another winter approaching. We could be looking at a relative
game here. If the market drops 15 percent, Microsoft may fall only 5 percent. If I am wrong and the market
heads higher. I expect Microsoft to perform even better than the market.

There is solid potential here, but I am amazed at what has taken place over the last 10 years.
The stock hit an all-time high back in 1999 at $54 a share. That means, even if it doubled from current
levels, it would still be sitting below where it was back then. This strongly demonstrates the absolute
necessity of never being a buy-and-hold investor. There is a time for everything.

Speaking of timing, right now might be a good
time to prepare for lower stock prices over the intermediate term. I know a lot of people are hanging
their hats on an approaching summer rally, but the weight of evidence simply does not support a sustained
move higher right now. Any rally that may develop should be used to raise cash and get defensive.

The coming low may or may not be a once-in-a-lifetime
chance, but if you don’t have cash, it won’t matter. Another bull market will come out of this. You want
to make sure you are ready when it arrives.


Hauke is the CEO of Samex Capital Advisors, a locally
based money manager. His column appears every other week. Views expressed here are the writer’s. Hauke
can be reached at 203-3365 or at

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