One of the things I love about using Peter Lynch’s method for picking stocks is it gives amateur’s like me a chance to use my everyday experience to spot investments.
That’s exactly the story with Microsoft (NASDAQ:MSFT).
You’d never guess it to look at it but Microsoft is growing. It’s transition into cloud computing and IAAS / SAAS is generating revenue results. In Q1, year-over-year revenue from Azure was up 90%.
The cloud contributes substantially to Microsoft’s free cash flow, $32 billion last year, which is a theme I’m using for stock picks in my portfolio. Another area of growth for Microsoft comes from gaming.
The XBOX isn’t usually thought of as a driver for Microsoft’s revenue. What’s changing is the trend towards distributing content via the internet. You saw the transformation of the movie and TV industry turn Netflix into a company with a market cap of $86 billion and Blockbuster’s into zero.
Gaming hardware manufacturers like Microsoft are syphoning off customers from GameStop (NYSE:GME). The subscription-based model for gaming is becoming more popular with gamers and Microsoft is positioned to take advantage. Year-over-year, XBOX SAAS revenues are up 20%. Sorry GameStop, your days are numbered.
All this growth has turned this Stalwart into a Fast Grower. It still carries a 1.8% dividend and it’s PEG ratio sits at a tantalizing 0.864. This year alone the stock is up 35%.
Not bad for a dinosaur like Microsoft.