Microsoft is the second most popular stock among hedge funds at the end of March. It is even more popular than Apple which is one of the main reasons behind Microsoft’s recent misery. David Einhorn stated three facts about Microsoft (MSFT) in his presentation at the Ira Sohn Conference:
1. Microsoft has a terrible management.
2. Microsoft wastes billions on R&D.
3. Microsoft trades at a huge discount.
The main problem with Microsoft is that none of the hedge funds are big enough to take an activist stake in Microsoft and force the management to do the right thing for the investors. Thirty percent of the long/short equity hedge funds we follow sheepishly bought Microsoft and waiting for something to happen, yet nothing happens. The stock lost more than 12% this year. So Einhorn thought this is a great opportunity to send a clear message to Ballmer and Bill Gates who is really behind Ballmer. We aren’t very hopeful that Einhorn will be successful in his quest to shake things up.
Here are the top five hedge funds that desperately need something positive happen at Microsoft:
1. Boykin Curry – Eagle Capital: $427 Million at stake
2. Jeffrey Tannenbaum – Fir Tree: $296 Million at stake
3. Robert Atchinson – Adage Capital: $255 Million at stake
4. David Einhorn – Greenlight Capital: $230 Million at stake
5. D. E. Shaw: $189 Million at stake
Whitney Tilson has been consistently preaching about investing in Microsoft. Earlier this year, he predicted Microsoft to reach $35 in 2011. Last month, he said Microsoft is a better investment than Apple. Our motto is a bargain that stays a bargain isn’t really a bargain.