Stocks Overvalued
 

Not when Micrsoft is buying back $40B of there own shares and giving $0.18 a share dividend. and HP $80B

How is it good or a measure of valuation that MSFT finds that its best returns are buying stock from Bill Gates, and paying out a measly .18 a share (2%). I find it a little disappointing that MSFT can't invest 40 Billion in cash in anything other than a stock that has had nearly a 0% return over a 5 year period. Not to mention the fact that it may have been a lot better to pay stockholders a large special dividend while taxes on dividends remain low.

MSFT's inability to diversify its earnings stream beyond Office and Windows is why it has been priced between 22 and 30 for the past 5 years. If they can't figure out a way to use their cash successfully, they are just a mature large cap stock that should be paying at least a 4% dividend, and remain priced at 11 times forward earnings.

And didn't HP just announce cutting 24K jobs last week?

Microsoft isn't buying back their shares for the dividend. They're buying them back because they think their own stock will appreciate more and will be less risky than any other investment they can make. They're trading near a 52 week low in a bear market. At one point today they were up a dollar or so. That's 5%. If they get back up to their $37 52 week high, they'll almost double their money. If it takes them 5 years to get back up to $37 they'll still have almost a 20% yearly return.

Someday the market will turn around and someday Microsoft will again prodce a product that someone buys because they want it, not because they have to. When that happens, Microsoft will be a good stock to own again. Microsoft is making the bet that the day will come sooner rather than later.

+1

It's the closest you can get to legally buying with inside information.

Didn't HP just buy something recently, and as an efficency move they are consolidating thus laying off redundent positions.

HPQ bought EDS and the 24K layoffs are part of the merger integration. EDS has 140K employees, too many. HPQ will cut heads, especially in high-cost locations, and improve EDS' margins.