Apple Versus Microsoft: What Do Hedge Funds Think?

Ubben’s pick: Microsoft

Behind the next proverbial door we’ll take a look at Jeff Ubben of ValueAct Capital, an activist investor who has a longer-term focus than many of his corporate raider peers. Ubben and ValueAct took a huge stake in Microsoft back in April, and the position represents close to $2 billion on the books. In the eyes of most analysts familiar with the matter, it’s widely understood that Ubben’s aim is for Microsoft to concentrate on cultivating its Azure platform to become the top dog of cloud computing.

Ubben was also at the VIC in New York, and his statements on Microsoft echoed those of Yacktman. According to CNNMoney, the crux of his bullish thesis—in addition to the recently approved buyback and dividend boost—is that Microsoft can rely on its enterprise contract staple for the long term. Apple and its peers, on the other hand, “have to run faster every year to keep up,” Ubben said.

Final thoughts

At the end of the day, it’s up to each individual investor to make up his or her own mind about the Apple-Microsoft debate. The elite hedge fund crowd is leaning toward Apple, and Einhorn is sticking with his guns now that Tim Cook and management have shown their shareholders the money.

Apple’s apparently cheap valuation can be called into question, though, if you’re in Yacktman’s camp with regard to margin pressures. Or, if you’re like Ubben and are more confident in Microsoft’s cloud opportunity and existing strengths in enterprise computing, it’s reasonable to feel like the company represents a safer investment than Apple. Either way, the world’s richest investors are split on the matter of Apple versus Microsoft, and this is a debate that doesn’t look like it will be decided any time soon.

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