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Anna Píchová: I think that the right time for increasing the position in Microsoft will come

David Boulder
12. 4. 2023
5 min read

In this interview, analyst Anna Píchová assesses the stock markets in 2023 and her bets on technology leaders such as Microsoft. When it comes to investments, she still sees opportunities for picking quality companies, such as Teck Resources $TECK+1.9%, which she recently included in her portfolio.

Anna Píchová

Anna Píchová is a Principal Equity Analyst at Cyrrus Investment Group (Cyrrus is an investment firm founded in 1995 that engages in securities trading and client investment management).

After less than half a year we have our second interview here, Anna, I would like to ask you, how do you assess the events in 2023 on the stock markets so far? Is the situation developing as you expected?

The situation in the first quarter was more optimistic than I expected. This was particularly true at the beginning of this year. Valuations have also risen to slightly higher levels than would make sense given the level of interest rates. However, I am not surprised by the higher volatility in recent weeks, which is a result of the general nervousness where everyone is sort of expecting a slowdown and a recession to come, but so far the macroeconomic data has come out solid. However, the situation remains very favourable for stock-picking and some titles can be picked up at interesting prices.

Do you think the Fed's latest interest rate hike was a good move given what has been happening in the banking sector?

I think the interest rate hike was the right move. Stability of the price level is one of the Fed's objectives and the signal it is sending is, in my opinion, the right one. As the numbers suggest, price pressures persist, especially in services, so the economy needs to continue to be dampened. One bank's problems, which were caused by poor risk and liquidity management, should not cause it to deviate from meeting its mandate.

How do you see the situation around these troubled banks in general?

The situation is a reminder of the important role that trust plays in the financial world. It was also a kind of test of the preparedness of the regulators who, in my view, handled the whole situation well. Their early intervention, both with SVB and CS, helped the whole situation.

In your opinion, where can one find refuge in these uncertain times, where can one put spare funds?

If we perceive the times as uncertain and are risk averse, there is still the option to take advantage of higher interest rates and use savings or fixed deposits. We can also use interest bearing deposits if we are waiting for a suitable investment opportunity in one of our preferred companies/sectors. Otherwise, other methods and options are always up to each investor and their approach to their portfolio. As for my approach in general, I have not changed my strategy and so the answer remains the same as the last time we spoke. So I'm sticking with regular investments, with only a few minor changes to the portfolio composition. I sold BMW shares and a few weeks ago included the miner Teck Resources in the portfolio.

Microsoft has also pulled up nicely since our last conversation (specifically from $236 to today's $282). Did you end up overbought?

In the end, I didn't overbought and didn't increase the position, I was primarily dealing with a broker change. I think the time to increase the position will come.

You must definitely be happy to see the praise and potential mentioned in connection with ChatGPT. Do you think Microsoft could be a dominant player with AI?

Microsoft was the first to launch a product that is unparalleled and in this it has burnt the pond for many. Some still see Microsoft as a "legacy" company that has nothing to offer and does not innovate. However, this narrative has been invalid in my view for many years and Microsoft's latest moves prove this. With the rapid integration of ChatGPT into Bing, Microsoft has secured an interesting position in the AI field. It's already showing that ChatGPT should be widely used in some industries, and so companies will want to use this technology. Since many of these companies are already using Microsoft products, they will also be taking this solution from Microsoft. Artificial intelligence cannot do without computing power, so higher demand for Azure will go hand in hand. This will strengthen the company's position in the market. So I believe that Microsoft can become a dominant player with AI. I would just like to point out here that there are two sides to this coin as well. In this case, higher spending and investment on computing power by Microsoft.

Is Microsoft losing out to its competitors (e.g. Google) in this respect?

Partly yes - in my opinion Microsoft has a slightly better situation and market position. However, even Google has AI not only in the form of the Bard chatbot, but also uses it in search and in designing posts, where it is certainly further along. What is interesting is the different approach, with each company taking a different path - Microsoft through investment in OpenAI and a nearly finished product, while Google is going the self-development route.

Do you have a target price for $MSFT+0.7% where you'd like to sell, or is it simply a long investment without any precise expectations?

I have a target price based on DCF for Microsoft, but Microsoft is a long investment for me on a horizon longer than the target price captures. Thus, I am not considering selling under the current situation and with the current management of the company.

  • Did you enjoy today's interview? If so, be sure to follow us, my guest today was Anna Píchová.

Please note that this is not financial advice.

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