Investment funds can move a stock in one direction given their vast amounts of capital to throw around. In the case of Microsoft, increased fund ownership could bring a bullish trend in the near future.
The software giant gained 12% in 2024, which fell behind the broader S&P 500’s gain. Nonetheless, stock purchases by funds indicate some level of faith that the stock could be poised for gains in 2025.
Investor’s Business Daily noted that data from MarketSurge showed mutual funds “owning a piece of Microsoft stock ramped up from 9,643 funds in the first quarter of 2023 to 10,336 at the end of 2024.” As mentioned, large purchases can certainly help sway a stock in a bullish direction. For savvy traders who pick up on the buying activity, this could open opportunities for bullish positions.
“With their massive buying power, the best and largest mutual funds often need weeks, even months, to completely fill out a position in a single stock,” Investor’s Business Daily explained. “Their continuous buying ultimately creates positive psychology in a stock.”
Likewise, ETFs can also play a role with purchasing buckets of Microsoft stock. In the short-term horizon, traders will typically focus on any indications of bullishness, and in the near term, that means earnings.
Positive Earnings Ahead?
Microsoft will report its earnings in the new year during the first week of February. In its last report, the software giant beat earnings per share estimates, coming in at $3.30; the consensus figure was pegged at $3.10.
Artificial intelligence (AI) has been a persistent investing theme in 2024, and that could continue boosting Microsoft’s revenue. With Microsoft continuing to invest its AI platforms, it could continue to beat earnings estimates.
“Revenue is expected to climb 11% in the just-ended December quarter to $68.9 billion, then increase 13% vs. year-ago levels in the following three quarters,” Investor’s Business Daily noted, adding that the current market environment appears beneficial for not only Microsoft, but most tech giants as “the fundamental picture remains rosy for this megacap tech.”
If Microsoft’s stock pops following its earnings report in February, traders can maximize its profits using the Direxion Daily MSFT Bull 2X Shares (MSFU). The leveraged single-stock ETF provides double the exposure without using a margin account or doubling up on a trading position with increased shares.
On the other hand, if short-term bearishness results, traders can also use the Direxion Daily MSFT Bear 1X Shares (MSFD). When the euphoria from a positive earnings report subsides, traders can also benefit from a short-term sell-off with MSFD. This speaks to the flexibility that these single-stock ETFs offer irrespective if the stock heads up or down.
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