Ackman Increases Microsoft Stake to 14% of Portfolio
Written by Emily J. Thompson, Senior Investment Analyst
Updated: 40 minutes ago
0mins
Source: Fool
- Shareholding Shift: Bill Ackman's hedge fund, Pershing Square, owned zero shares of Microsoft (MSFT) last quarter but disclosed a 5,654,078-share stake this quarter, representing over 14% of its portfolio, currently valued at approximately $2.1 billion, indicating strong confidence in Microsoft.
- Investment Rationale: Ackman's increased stake in Microsoft may be linked to his bullish outlook on AI stocks, as Microsoft is one of the largest AI companies globally with significant exposure to AI software and data centers, despite having heavily sold Alphabet shares last quarter, which are also AI-related.
- Relative Valuation: Over the past six months, Alphabet's stock has risen nearly 30%, while Microsoft's shares have declined by about 10%, leading Ackman to believe that Microsoft's current valuation is
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Analyst Views on MSFT
Wall Street analysts forecast MSFT stock price to rise
34 Analyst Rating
32 Buy
2 Hold
0 Sell
Strong Buy
Current: 419.090
Low
500.00
Averages
631.36
High
678.00
Current: 419.090
Low
500.00
Averages
631.36
High
678.00
About MSFT
Microsoft Corporation is a technology company. The Company develops and supports software, services, devices, and solutions. The Company’s segments include Productivity and Business Processes, Intelligent Cloud, and More Personal Computing. The Productivity and Business Processes segment consists of products and services in its portfolio of productivity, communication, and information services. This segment primarily comprises: Office Commercial, Office Consumer, LinkedIn, and Dynamics business solutions. The Intelligent Cloud segment consists of server products and cloud services, including Azure and other cloud services, SQL Server, Windows Server, Visual Studio, System Center, and related Client Access Licenses (CALs), and Nuance and GitHub; and Enterprise Services, including enterprise support services, industry solutions and Nuance professional services. The More Personal Computing segment primarily comprises Windows, Devices, Gaming, and search and news advertising.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
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- Strong Financial Performance: Microsoft reported an 18% year-over-year revenue increase in its fiscal Q3 2026, with net income rising by 23%, demonstrating resilience and long-term investment value amid market fluctuations.
- Cloud Business Driving Revenue: The Microsoft Cloud platform serves as a primary revenue source, with businesses relying on its scalable IT infrastructure, creating stable recurring revenue and making it difficult for clients to switch to other providers, thereby enhancing Microsoft's market position.
- New Opportunities in AI: Microsoft's AI business surpassed a $37 billion annual revenue run rate in fiscal Q3 2026, reflecting a 123% year-over-year growth, which is expected to drive revenue growth back to over 20% in future quarters.
- Strategic Product Advantage: Microsoft's Agent 365 software aids companies in creating secure AI agents, with clients like Air India and Broward County School District saving millions, further solidifying Microsoft's value and market share in the eyes of customers.
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Gates Foundation Sells All Microsoft Stock Amid Market Concerns
- Foundation Stock Sale: The Gates Foundation sold all its Microsoft shares in Q1, raising market concerns; however, with a shutdown planned by 2045, the foundation must liquidate its assets gradually to fulfill its donation commitments.
- Microsoft Valuation Decline: Microsoft’s stock has dropped over 20% from recent highs, with a current market cap of $3.1 trillion, indicating a valuation low during a heavy capital investment cycle in AI, which may affect investor confidence.
- Cash Flow Assessment: Evaluating Microsoft’s stock using cash from operations reveals its lowest valuation since 2019, suggesting a significant retraction that reflects market caution regarding future growth prospects.
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Ackman Increases Microsoft Stake to 14% of Portfolio
- Shareholding Shift: Bill Ackman's hedge fund, Pershing Square, owned zero shares of Microsoft (MSFT) last quarter but disclosed a 5,654,078-share stake this quarter, representing over 14% of its portfolio, currently valued at approximately $2.1 billion, indicating strong confidence in Microsoft.
- Investment Rationale: Ackman's increased stake in Microsoft may be linked to his bullish outlook on AI stocks, as Microsoft is one of the largest AI companies globally with significant exposure to AI software and data centers, despite having heavily sold Alphabet shares last quarter, which are also AI-related.
- Relative Valuation: Over the past six months, Alphabet's stock has risen nearly 30%, while Microsoft's shares have declined by about 10%, leading Ackman to believe that Microsoft's current valuation is
See More
Bill Ackman Increases Stake in Microsoft
- Portfolio Adjustment: Bill Ackman's hedge fund, Pershing Square, disclosed a 5,654,078-share stake in Microsoft valued at approximately $2.1 billion this quarter, making it the fifth-largest investment in the fund, indicating confidence in Microsoft's future growth.
- AI Market Positioning: Ackman's investment strategy appears closely tied to the potential of the artificial intelligence sector, with Microsoft being one of the largest AI companies globally, despite having sold Alphabet shares related to AI in the previous quarter.
- Relative Valuation Consideration: Over the past six months, Alphabet's stock has risen nearly 30% while Microsoft's shares have declined by about 10%, leading Ackman to view Microsoft's current valuation as
See More
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- Apple's Record High: Apple's stock closed at nearly $309 last Friday, marking a year-to-date increase of approximately 13.5%, which not only reflects its strong market performance but also indicates investor confidence in its future growth, despite concerns over CEO Tim Cook's impending retirement.
- Nvidia's Challenges: Despite Nvidia's impressive recent earnings report, its stock price has noticeably declined, indicating that even strong performance cannot shield it from short-term market fluctuations, suggesting a need to reassess its capital allocation strategy to regain investor confidence.
- Nike's Survival Opportunity: Nike has been granted a chance to hold on after its last earnings call, facing pressure but still having the potential to restore investor confidence through improved performance, indicating a cautiously optimistic market outlook for its future.
- Importance of Capital Returns: Analysts emphasize that Nvidia must adopt a more aggressive capital return strategy, including increasing dividends and stock buybacks, to bolster shareholder trust and enhance stock prices, a strategy validated by Apple's successful experience.
See More
Microsoft's Stock Sell-Off Presents Buying Opportunity
- Historical Sell-Off Analysis: Microsoft has experienced two sell-offs of over 30% in the past decade, and historically, each time it has rebounded to new highs within 6 to 12 months, indicating strong recovery potential and investment value.
- Operating Cash Flow Metric: The stock tends to sell off when its price-to-operating cash flow ratio approaches 30, a pattern validated over the past decade, suggesting that the current stock price is undervalued and poised for a rebound.
- Recent Performance Growth: Microsoft reported an 18% revenue increase in its most recent quarter, indicating robust core business performance; despite the stock's decline, the company's fundamentals remain strong, highlighting its long-term growth potential.
- Market Outlook: Analysts are optimistic about Microsoft's prospects for 2026 and 2027, predicting it could be one of the top-performing large tech stocks, suggesting that investors consider increasing their holdings during this current dip.
See More
Microsoft's Cloud and AI Business Drive Growth Potential
- Strong Financial Performance: Microsoft reported an 18% year-over-year revenue increase in its fiscal Q3 2026, with net income rising by 23%, demonstrating resilience and long-term investment value amid market fluctuations.
- Cloud Business Driving Revenue: The Microsoft Cloud platform serves as a primary revenue source, with businesses relying on its scalable IT infrastructure, creating stable recurring revenue and making it difficult for clients to switch to other providers, thereby enhancing Microsoft's market position.
- New Opportunities in AI: Microsoft's AI business surpassed a $37 billion annual revenue run rate in fiscal Q3 2026, reflecting a 123% year-over-year growth, which is expected to drive revenue growth back to over 20% in future quarters.
- Strategic Product Advantage: Microsoft's Agent 365 software aids companies in creating secure AI agents, with clients like Air India and Broward County School District saving millions, further solidifying Microsoft's value and market share in the eyes of customers.
See More
Gates Foundation Sells All Microsoft Stock Amid Market Concerns
- Foundation Stock Sale: The Gates Foundation sold all its Microsoft shares in Q1, raising market concerns; however, with a shutdown planned by 2045, the foundation must liquidate its assets gradually to fulfill its donation commitments.
- Microsoft Valuation Decline: Microsoft’s stock has dropped over 20% from recent highs, with a current market cap of $3.1 trillion, indicating a valuation low during a heavy capital investment cycle in AI, which may affect investor confidence.
- Cash Flow Assessment: Evaluating Microsoft’s stock using cash from operations reveals its lowest valuation since 2019, suggesting a significant retraction that reflects market caution regarding future growth prospects.
- AI Investment Outlook: Despite short-term challenges, Microsoft’s Azure cloud platform shows strong performance in AI, indicating long-term growth potential; the foundation's stock sale may be more noise than signal, given Gates' lack of involvement with the company.
See More
Ackman Increases Microsoft Stake to 14% of Portfolio
- Shareholding Shift: Bill Ackman's hedge fund, Pershing Square, owned zero shares of Microsoft (MSFT) last quarter but disclosed a 5,654,078-share stake this quarter, representing over 14% of its portfolio, currently valued at approximately $2.1 billion, indicating strong confidence in Microsoft.
- Investment Rationale: Ackman's increased stake in Microsoft may be linked to his bullish outlook on AI stocks, as Microsoft is one of the largest AI companies globally with significant exposure to AI software and data centers, despite having heavily sold Alphabet shares last quarter, which are also AI-related.
- Relative Valuation: Over the past six months, Alphabet's stock has risen nearly 30%, while Microsoft's shares have declined by about 10%, leading Ackman to believe that Microsoft's current valuation is
See More
Bill Ackman Increases Stake in Microsoft
- Portfolio Adjustment: Bill Ackman's hedge fund, Pershing Square, disclosed a 5,654,078-share stake in Microsoft valued at approximately $2.1 billion this quarter, making it the fifth-largest investment in the fund, indicating confidence in Microsoft's future growth.
- AI Market Positioning: Ackman's investment strategy appears closely tied to the potential of the artificial intelligence sector, with Microsoft being one of the largest AI companies globally, despite having sold Alphabet shares related to AI in the previous quarter.
- Relative Valuation Consideration: Over the past six months, Alphabet's stock has risen nearly 30% while Microsoft's shares have declined by about 10%, leading Ackman to view Microsoft's current valuation as
See More
Market Insights and Reflections from the Investing Club
- Apple's Record High: Apple's stock closed at nearly $309 last Friday, marking a year-to-date increase of approximately 13.5%, which not only reflects its strong market performance but also indicates investor confidence in its future growth, despite concerns over CEO Tim Cook's impending retirement.
- Nvidia's Challenges: Despite Nvidia's impressive recent earnings report, its stock price has noticeably declined, indicating that even strong performance cannot shield it from short-term market fluctuations, suggesting a need to reassess its capital allocation strategy to regain investor confidence.
- Nike's Survival Opportunity: Nike has been granted a chance to hold on after its last earnings call, facing pressure but still having the potential to restore investor confidence through improved performance, indicating a cautiously optimistic market outlook for its future.
- Importance of Capital Returns: Analysts emphasize that Nvidia must adopt a more aggressive capital return strategy, including increasing dividends and stock buybacks, to bolster shareholder trust and enhance stock prices, a strategy validated by Apple's successful experience.
See More
Microsoft's Stock Sell-Off Presents Buying Opportunity
- Historical Sell-Off Analysis: Microsoft has experienced two sell-offs of over 30% in the past decade, and historically, each time it has rebounded to new highs within 6 to 12 months, indicating strong recovery potential and investment value.
- Operating Cash Flow Metric: The stock tends to sell off when its price-to-operating cash flow ratio approaches 30, a pattern validated over the past decade, suggesting that the current stock price is undervalued and poised for a rebound.
- Recent Performance Growth: Microsoft reported an 18% revenue increase in its most recent quarter, indicating robust core business performance; despite the stock's decline, the company's fundamentals remain strong, highlighting its long-term growth potential.
- Market Outlook: Analysts are optimistic about Microsoft's prospects for 2026 and 2027, predicting it could be one of the top-performing large tech stocks, suggesting that investors consider increasing their holdings during this current dip.
See More
