Key Takeaways
- B&D White Capital Company, a $1.03 billion fund, sold all of its Microsoft (MSFT) and Meta Platforms (META) shares in Q3, its latest 13F filing shows.
- Defense stocks Kratos (KTOS) and L3Harris (LHX) were its third- and fourth-largest holdings as of Sept. 30, after big buys in the quarter.
- Analysts see 20% upside in Microsoft and 39% in Meta, but Meta’s free cash flow has turned negative while Microsoft’s earnings estimates keep rising.
- The Meta sale is the easier one to defend, and selling Microsoft looks like a mistake on the numbers.
A $1 billion fund just walked away from two of the biggest names in tech. B&D White Capital Company, which manages $1.03 billion, held no shares of Microsoft or Meta Platforms at Sept. 30, according to its 13F for the quarter ended that day, filed on Monday.
Two tech giants, gone by Sept. 30
At June 30, the fund held 118,445 Microsoft shares worth $44 million, 4.4% of its 13F stocks, and 59,244 Meta shares worth $33 million, or 3.3%. Three months later, both were gone.
A 13F only shows what a fund held on the last day of a quarter, so there’s no way to tell when in the quarter it sold, at what price, or why.
The quarter’s big buys were in defense. Kratos went from a tiny stake to 1.82 million shares worth $78 million, 34% of its 13F holdings and its third-largest position.
L3Harris was new, with 248,330 shares worth $59 million, or 25.7%. Since Sept. 30, L3Harris is up 10%, and Kratos is down 18%.
TIKR tracks 58 analysts on Microsoft. How many say “Buy”?
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Microsoft is beating its own guidance
Microsoft is up 42% from its June 30 price to Friday’s close. (That’s the stock’s move, since the fund’s sale price isn’t public.)
The business has given investors plenty to like since then. On Oct. 28, Microsoft said Azure grew 48% in its fiscal Q1, ahead of the roughly 40% management had guided. CFO Amy Hood guided to 45% growth in constant currency for the current quarter.
Analysts were raising their numbers even before that report: their earnings estimates for fiscal 2027 through 2029 rose 2% to 6% from the end of June to late October.
The stock trades at about 26x forward earnings. That’s right around its 12-year average of 26x and well below its five-year average of 29x.
The consensus price target from 58 analysts is $636, 20% above Friday’s close and it’s almost the highest point of the past year:
Free cash flow fell to $18.6 billion in the quarter from $25.7 billion a year earlier as capital spending climbed, and Microsoft sold $25 billion of bonds the next day.
Meta is spending more than it brings in
Meta is up 8% from its June 30 price, and it’s still 28% below its 52-week high.
Its ad business is growing fast: Q3 revenue rose 26% to $64.6 billion. But capital spending of $34.9 billion topped operating cash flow of $32.8 billion, so free cash flow came in at negative $2.1 billion.
S&P Global Ratings cut its outlook on Meta’s AA- rating to negative on Oct. 30.
It forecasts a $71 billion free operating cash flow deficit in 2027 on its own measure. Analysts expect less of a hole, with consensus free cash flow at negative $47 billion that year.
And their earnings estimates for 2026 through 2028 fell 3% to 5% from the end of June to late October.
The stock trades at about 19x forward earnings, below its five-year average of 21x and its 10-year average of 23x.
Wall Street still sees plenty of upside: the consensus target from 63 analysts is $850, 39% above Friday’s close, and it has barely moved over the past year:
Even the lowest target, $629, sits above Monday’s close.
Microsoft was the one to keep
I can understand the Meta sale. A company spending more than it brings in, with its credit outlook just cut, is a fair thing to step away from, even at 18x earnings.
The Microsoft sale is much harder to explain on the numbers. Azure is beating guidance, estimates are rising, and the stock trades near its long-run multiple. Its cash flow is shrinking too, but it’s still positive.
If I could keep only one of the two, it’d be Microsoft, and it isn’t close.
Of course, both companies report again in late January, and Meta’s report will include its 2027 capex plan.
If Meta guides well above the $210 billion analysts expect, I’d feel even better about the sale. The fund’s next 13F, for the quarter ending Dec. 31, is due in mid-February.
So what is Microsoft stock actually worth?
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any of the stocks mentioned. Thank you for reading, and happy investing!
