The market is definitely in need of a really bad day. A day that will have many an individual investor throw in the towel. A day that traders call CAPITULATION. This is when the market opens down huge or gets clobbered early on only to make a late day recovery. Typically, this signals a short-term bottom. While I am quite confident that stocks can be bought 5% cheaper than current levels, one really cannot predict or know when capitulation hits and trust me, this is one sale you don't want to miss.

This is why some stocks like Goldman Sachs (GS), Apple (AAPL), Microsoft (MSFT) and even Google (GOOG) need to be bought when they are brought down during this brief window of opportunity. Let me explain here why I think Microsoft should be bought.

The company announced a great quarter back in January, with EPS coming in over 90% higher year-over-year at 50 cents. Microsoft beat revenues by $410 million and improved operating margins by 12% over the same quarter last year. Even XBox 360 finally raked in a profit - and not too shabby either at $357 million. Moreover, the company has over $21 billion in cash.

The $44.6 billion bid for Yahoo (YHOO) caused the Microsoft stock to drop $4 in 4 sessions following the news. That is a whopping $38 billion in market cap lost just as a result of the bid. Since the bid, Microsoft has lost a total of $43 billion while Yahoo is up a little over $13 billion in market cap. So where is the remaining $30 billion? It seems that the market has been a little unfair to Microsoft. Even if there is some depreciation in Microsoft due to the merger, it does not justify $30 billion in lost market cap.

I think this is a great opportunity to own a company that just grew earnings at 92% last quarter at less than 15 times this year's estimates (if you take into account their cash hoard). If Microsoft withdraw's their bid, they go up really fast. If they do buy Yahoo, it will take some time, but its as safe a bet as can be in this rotten market.

One final thought - I wonder why Microsoft didn't go after Sony (SNE). After all, they just lost the HD-DVD battle to Sony's BluRay format and the PS3 is the biggest threat to Microsoft's XBox 360 franchise. Perhaps the weak dollar might have prevented this or maybe it is harder to integrate a Japanese company with one in the US. I certainly can't think of any such examples.

-- Faisal Laljee
Full Disclosure: I own MSFT but my position can change anytime without notice.

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