TNW Conference 2022 will be bigger, bolder, and better! Get your tickets now >>

The heart of tech

This article was published on August 23, 2011

Massive value-focused hedge fund picks up $312 million in Microsoft stock

Massive value-focused hedge fund picks up $312 million in Microsoft stock
Alex Wilhelm
Story by

Alex Wilhelm

Alex Wilhelm is a San Francisco-based writer. You can find Alex on Twitter, and on Facebook. You can reach Alex via email at [email protected] Alex Wilhelm is a San Francisco-based writer. You can find Alex on Twitter, and on Facebook. You can reach Alex via email at [email protected]

Microsoft’s stock price has been a problem for the company over the past decade. The reason? Nothing. That’s exactly what the stock has effectively done.

Since the first tech bubble exploded, Microsoft has been trading between $20, and $30 a share. This has gone on for almost a decade. There was one period of exception in late 2007, in which Microsoft managed to break the $30 dollar mark, but the stock quickly declined in 2008 and fell back into its range.

In other words, aside from regular dividends, there has been little upside to Microsoft for the long-term holder for some time now, roughly since the ’90s. That many hedge funds have been limiting their exposure to Microsoft is therefore hardly surprising.

However, a new, well-respected face, Seth Klarman of the Baupost Group, recently picked up $312 million in Microsoft stock over the past quarter. He joins investor David Einhorn in being bullish about Microsoft’s market prospects. In a sea of discontent over Microsoft’s inability (especially among Microsoft employees) to boost its market value, Klarman’s name sticks out in a very important way: he is a noted value investor. That means that he sees Microsoft as intrinsically undervalued, even while other investors of his magnitude are not buying, but selling their holdings of MSFT.

Why Klarman became bullish on Microsoft over the last quarter is unknown. He could be anticipating Microsoft’s investment in products such as Windows 8 or Office 15 to pay off. But more likely, he expects Microsoft to return some of its over $50 billion cash hoard to investors, making for a fat payout for any large shareholder, as Klarman now is. Does he know something that we don’t?

Whatever the case, Microsoft’s executive staff can breathe a bit easier now that they have attracted some top-tier fans, even if most institutional investors have become bored.

Get the Microsoft newsletter