MSFT gets my best rating because the company’s ROIC, at 72%, ranks 8th in the S&P 500 while its stock price (~$31.52/share) implies the company’s profits will permanently decline by about 20%. High profitability and low valuation create excellent risk/reward in a stock. Here is my free report on MSFT.
Ask Matt readers can access, for a limited time, my stock screener and get my quality-of-earnings and valuation ratings on 3000+ stocks.
My definition of good risk/reward for a fund is the same as it is for a stock, and my stock research is the foundation of my fund research. Ergo, my fund ratings are predictive just as my stock ratings are predictive.
My regular readers know that I am bullish on the tech sector as it ranked first out of all sectors as detailed in our sector roadmap. They also know that just because a sector has lots of good stock it may not have lots of good ETFs or mutual funds. Similarly, there are lots of ETFs and funds that make large allocations to MSFT. However, most of those funds also make much larger allocations to lower-quality stocks that cause the fund to get my Neutral rating or worse. Below are the only funds that allocate more than 5% to MSFT and get my Attractive rating or better as of March 16.
- Putnam Funds Trust: Putnam Global Technology Fund (PGTRX), (PGTYX) and (PGTDX) – the A and M shares get my Neutral rating b/c of higher costs
- Technology Select Sector SPDR (XLK)
- PowerShares RAFI Fundamental Pure Large Growth Portfolio (PXLG)
- Yacktman Funds, Inc: Yacktman Focused Fund (YAFFX)
- Pear Tree Funds: Pear Tree Quality Fund (USBOX) and (QGIAX)
- GMO Trust: GMO Quality Fund (GQETX), (GQEFX), (GQLFX), GQLOX)
- Columbia Funds Series Trust II: Columbia Large Growth Quantitative Fund (RDLIX), (RDLCX), (CGQRX), (RDLWX), (RDLFX), and (CLQZX)
My ratings and free reports (updated daily) on 7400+ funds are available from my fund screener.
Disclosure: I own MSFT. I receive no compensation to write about any specific stock, sector or theme.