What is ValueAct Holdings betting on?
From a portfolio management perspective, an allocation into Microsoft (MSFT) by ValueAct Holdings is inherently a bet that MSFT will outperform the following list of benchmarks:
Clearly, its stock price has diverged considerably from that of its peers, as well as the value of the ETFs holding it. So, there could be some underlying issues with management strategy that are creating a significant drag on performance.
Is the gamble worth it?
The Technology Select Sector SPDR Fund (XLK) has more than 80% of its holdings invested in the tech sector. Its average YTD (year-to-date) performance is 6.3%, and MSFT is included in that sample. Yet MSFT’s has returned a meager 3% YTD. Other companies in that sample, including Apple (AAPL), Oracle (ORCL), Salesforce (CRM), and Amazon.com (AMZN) have much higher YTD returns.
Given that Microsoft has underperformed all of these benchmarks, perhaps ValueAct Holdings may be betting on something else.