Microsoft Is a Must-Have for Your Portfolio

NEW YORK (TheStreet) -- Strange looks and "Oh, OK" are typically the responses I receive when I tell people that Microsoft (MSFT) and General Electric (GE) are the stocks they should buy.

When people ask me for stock tips, I know that most of the time they're thinking of companies that will make them a lot of money quickly.

But they should be thinking instead about stocks that will deliver a better-than-average return with the least amount of risk.

If your eyes aren't sore from staring at charts and Securities and Exchange Commission filings all day, leave the home runs to the traders who can get in and out of securities before you even hear about the news.

Some stocks are natural fits for long-term investors who seek to build real wealth over time. As a rule, this means dividend-paying stocks that dominate their space and don't have issues on their balance sheets or income statements.

I've touted the virtues of Microsoft ( MSFT) for more than a year, but the company remains a strong buy. You may think of "Mr. Softee" as little more than the maker of Windows, but that's a mistake. Microsoft's Azure is also one of the biggest players in cloud computing.

Microsoft maybe the largest player by revenue when you consider that Amazon.com ( AMZN), Google ( GOOG), Rackspace ( RACK), IBM ( IBM), Hewlett-Packard ( HPQ) and others are all paying Microsoft for every Windows-based server they host.

From my experience, Azure was much easier and straightforward to set up than Amazon's AWS. Both are priced about the same, giving Microsoft the edge due to a smaller learning curve. Cloud computing isn't where the real money is, not yet at least. And business software, Microsoft's cash cow, has proven it can compete against free software relatively easy.

MSFT Operating Income Annual Chart MSFT Operating Income Annual data by YCharts

The market reacted positively to the announcement of CEO Steve Ballmer stepping down even though operating profits have climbed at a rapid pace since Ballmer took over in 2000. The company has the resources to hire the very best talent, and you can expect another pop higher in shares once the replacement is announced.

For now, it's the dividend that investors should focus on. Stocks raising their dividend payments have a history of outperforming nondividend stocks. Today's 3% dividend can turn into a 6% yield in about five years at only half the rate of growth recently announced.

If you think Microsoft can't become exciting and its time has passed, think again and take a look at Yahoo!'s ( YHOO) chart. Sure, some of the gain is from investments in Alibaba, but remove that gain, and you can see what an active, hard-charging CEO can do.

Microsoft is next, don't miss it.

At the time of publication, Weinstein had no positions in stocks mentioned.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

Robert Weinstein is an active trader focusing on the psychological importance of risk mitigation, emotion and financial behavior of market participants. Robert co-founded the investing blog StockSaints, where he writes a journal about his trading activity and experiences.

In addition to TheStreet, Robert also contributes to Real Money Pro, providing real-time trading ideas for stocks, options and futures.

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