A Software Giant Revives; Booking 26% and 40% Option Gains

Nicholas Vardy

Nicholas Vardy has a unique background that has proven his knack for making money in different markets around the world.

This week, the Alpha Algorithm screen highlighted a familiar name, Microsoft Corporation (MSFT), which popped up in seven Alpha Algorithm strategies almost overnight.

In announcing earnings yesterday, Microsoft reported it had boosted its cloud business dramatically; showed strong growth in intelligent machine learning; increased its search engine market share; enjoyed a surge in Xbox users; and even boasted a pickup in personal computer sales.

Founded in 1975 and based in Redmond, Washington, Microsoft Corporation develops, licenses and supports software products, services and devices worldwide. The company licenses the Windows operating system and related software and Microsoft Office for consumers. It also provides Xbox gaming and entertainment consoles, Lumia phones and Skype.


  Microsoft versus the S&P 500 over 1 Year

Seven Investment Strategies Betting on Microsoft (MSFT)

  1. High Quality Stock

The stock exhibits positive fundamentals, including high return on equity, stable year-over-year earnings growth and low financial leverage.

  1. Fundamental Strength

Microsoft is a top U.S. stock based on fundamentals measured by book value, cash flow, sales and dividends.

  1. Hedge Fund Alpha

Based on publicly available disclosures, successful hedge fund managers are investing in the stock.

  1. Hedge Fund Gurus

Microsoft is one of the top U.S.-listed equity positions reported on Form 13F by select hedge funds with concentrated top holdings.

  1. Morningstar’s Moat

This stock is included in a strategy that tracks an equal-weighted index of 20 companies that Morningstar determines to have the highest fair value among firms with a sustainable competitive advantage or “moat.”

  1. Small-Cap/Value Tilt

Microsoft was selected using a multi-factor modeling approach aimed at finding a smaller-cap or value stock designed to enhance portfolio risk/return characteristics.

  1. Broker’s Best

It is one of Raymond James’ selection of stocks that are expected to outperform the S&P 500 over either a six- or 12-month period.


Buy Microsoft (MSFT) at market today.

Place your initial stop at $48.00.


With the stock jumping on yesterday’s earnings news, I am holding off on recommending options this week.

Portfolio Update

With several of your current positions strongly overbought, I am recommending that you close your related option positions.

  • Sell all of your AbbVie August $60 call options (ABBV160819C00060000), which last traded at $4.30, for a solid 40% gain.
  • Sell all of your Home Depot August $135 call options (HD160819C00135000), which last traded at $4.30, for another solid 26% gain.

I am keeping a close eye on several of your other option recommendations, especially Facebook (FB), McDonald’s (MCD) and O’Reilly Automotive (ORLY), each of which expire in August. Keep an eye out for any related special alerts outside of my normal weekly update each Thursday.


Nicholas Vardy

Nicholas A. Vardy

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