Microsoft Q2: Non‑Obvious Risks Hiding Behind The AI Boom

Core Insights - The article emphasizes the importance of generating alpha through independent investment strategies, focusing on sectors with perceived potential against the S&P 500 [1] Investment Approach - The company employs a generalist approach, analyzing various sectors as long as there is perceived alpha potential [1] - The typical holding period for investments ranges from a few quarters to multiple years [1] Research Methodology - The company builds and maintains spreadsheets that track historical financial data, key metrics, guidance trends, and performance indicators [1] - In addition to company filings, the company monitors relevant industry news and reports, as well as other analysts' coverage [1] - During significant events, such as CEO changes, the company conducts in-depth research on the leader's background and performance history [1] Valuation Techniques - The company rarely utilizes DCF models for long-term projections, believing they offer limited value [1] - Instead, the focus is on assessing company performance and the outlook on five key drivers of DCF valuation: revenues, costs and margins, cash flow conversion, capital expenditures, and interest rates [1] - For companies with high multiples, reverse DCF analysis is conducted to understand implied growth rates [1]