Microsoft is Set to Deliver Another Breakout Year in 2015

Microsoft comes in at #3 in the week-long countdown of the top five S&P 500 stocks to own for 2015. Microsoft had a banner year in 2014, up 24%, but shares have recently retreated, stalled amidst the market slowdown, providing a great entry point for fundamental investors. Not only does this company benefit from a recently reinvigorated personal computing cycle, but it also has a new CEO, Satya Nadella, who is a methodical innovator with a long-term bent, and a CFO, Amy Hood, who has relentlessly called for bold moves. With bold moves come bold predictions, three of which I'm going to make today. For starters, I believe Microsoft will spin-off Xbox - Microsoft is a computing, not a gaming company, and a sale of Xbox will leave the company flush with cash. With that cash, look out for a gigantic dividend boost. Finally, I bet the company's renewed cloud-based orientation will drive dramatic earnings acceleration. Tagging a market multiple on $3/share of earnings in 2015 gets me to a $54 stock, 18% higher than current prices.