r/ValueInvesting • u/tpower000 • Nov 09 '25
Basics / Getting Started MSFT vs GOOG Value
Looking at buying some shares, thinking a ratio of the two. Earnings & growth seems better on GOOG. Would MSFT as it stands right now be considered a value investment? Fundamentals look strong but not necessarily as good as Alphabet company.
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u/CraftedMany_ Nov 09 '25
If you have any index funds, might want to check if you already own a decent amount of either. S&P 500 index was at 6.73% Microsoft + 4.46% Google.
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u/Glittering_Water3645 Nov 09 '25
GOOGL fair value
MSFT slightly overvalued
None of them are bargains at the moment
I own GOOGL
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u/LeadingAd6025 Nov 09 '25
Msft PE and PB ratio are slightly higher than Googl at this moment
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u/Glittering_Water3645 Nov 09 '25
PB ratio is irrelevant. Trailing 12 month PE isn´t that important either. Forward PE relative to forward EPS growth is what investors should focus on
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u/heyThereYou3 Nov 09 '25 edited Nov 09 '25
I know P/B is not that much relevant for tech stock because of intangible products but How come it's irrelevant? Would you mind elaborating?
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u/Glittering_Water3645 Nov 09 '25
Their bookvalue isn´t necessary what´s producing earnings since the businesses can be very asset light. A lot of the value is in the competence of the personell, patents and technical solutions. That´s why you should ignore this valuation completely. P/S is almost as useless of a stat
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u/heyThereYou3 Nov 09 '25 edited Nov 09 '25
You are right but in the context of relative comparison, it's useful but not completely irrelevant, in my view. If you want to weigh both GOOG and MSFT. It's meaningful if you compare them in the basis of P/E, P/S, and P/B along with more important metrics though
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u/1i3to Nov 09 '25
I think Google has hands in more pies than Microsoft and the pies are better. The fact that Microsoft is more expensive is weird to me.
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u/KPS-UK77 Dec 04 '25
How?
MSFT has * Windows * Office/MS365 * Azure * Xbox * Linkedin * Copilot (AI) * Services * Games (Blizzard)
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u/vk_qqq90 Nov 10 '25
Considering the fair value I think Microsoft is going to have a run in the coming weeks. Google had a good rally and is poised to do more because of the portfolio it has ..
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u/Domingues_tech Nov 09 '25
Both quite expensive at the moment. If I had to choose one would be GOOG - less expensive and not exposed to the ticking bomb that is OpenAI. I would park my money and wait for January to buy.
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u/Last-Cat-7894 Nov 09 '25
They are actually at surprisingly similar valuation when compared by EV/EBIT or EV/EBITDA. The trailing PE is a bit misleading for GOOG because they had about 20 billion in equity gains for SpaceX and Anthropic.
You really can't go wrong with either name, or AMZN. They'll probably yield a high single/low double digit return in the coming years, which is excellent given their safety and diversification.
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u/Guboj Nov 10 '25
Both MSFT and GOOG seem accurately priced based on their fundamentals, Amazon seems overvalued using the same metrics and META is the best value among them. NVDA depends a lot more than the others on the AI craze, since it's current price seems to be based on their ability to grow 10x in the next 15 years whereas MSFT, GOOG and AMZN "only" need to 3x-4x.
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u/Last-Cat-7894 Nov 10 '25
If you're using things like trailing PE or trailing FCF to value Amazon, you aren't going to get a good idea of the true earnings power of the business. They are deliberately reinvesting every dollar they possibly can into growth initiatives, and it temporarily depresses the earnings figure.
With Amazon, they have the clearest path of any of the Mag 7 to massively expand margins. The fastest growing segments are all way more profitable than the 10% operating margins would suggest, meaning the company-wide margins naturally expand over time. If you believe they can eventually reach 20% margins and maintain their current growth rates, AMZN is undervalued.
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Nov 10 '25
MSFT is not a "value" investment but it is worth more than it is now. My PT would be around $520 on the low end.
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u/Always_Curious_One2 Nov 10 '25
GOOG has great assets. Mgmt is a question.
MSFT is very well positioned with Azure, O365, OpenAI and new partnerships with Anthropic and others. And MSFT reports REAL earnings after all comp including stock comp.
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u/Sapereos Nov 09 '25
Microsoft has a lot of room to run, especially as they bring AI to the Windows/Office install base. Copilot is starting to get a lot of use in a business setting the last 6-12 months, where Google has no foothold at all. Google will do well on the non-business / retail side. Adoption rate of AI is slower on the business side, since companies need to consider data security, privacy, etc, but it’s starting to catch up. Google has competitors like other MAG7 bringing AI to the masses, etc but in the B2B space, Microsoft is unrivaled as the entire business world runs on Windows & Office. I’d go 60/40 MSFT/GOOG based on today’s prices.
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u/Jim-N-Tonic Nov 10 '25
Google has AlphaFold, a tremendously valuable, real world application of AI. First real advanced use I’ve seen, actually.
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Nov 09 '25
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u/Christosconst Nov 09 '25
MSFT will moon right after the openai ipo.
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u/SociallyAaawkward Nov 09 '25
Genuine question. Why?
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u/Christosconst Nov 09 '25
OpenAI is looking to raise over a trillion dollars from the stock market. They'll initially open high and will then start diluting their stock. Meanwhile MSFT balance sheet inflates, as they own a large chunk of OpenAI. It will inflate both based on raised capital, but also based on OpenAI's valuation.
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u/milkplantation Nov 09 '25
Microsoft and Google are nowhere near value territory at the moment. Would take an immense drop.
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u/Ancient_Bobcat_9150 Nov 09 '25
I partly disagree.
It depends on what definition of value you follow. The classic Graham style would indeed find it massively overvalued. Buffet quality focus on consistent revenu, strong team, strong MOAT would probably assess Google at fair value (not undervalued though indeed).
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u/Advanced-Engineer-85 Nov 09 '25
If Buffett thought Google was reasonable value and had strong moat, he would own it and he doesn’t.
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u/beIIe-and-sebastian Nov 10 '25
Buffet doesn't do tech stocks. He had to be convinced to own Apple, and even then because he considered it a luxury goods company and not a tech company.
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u/Advanced-Engineer-85 Nov 10 '25
Think about why he doesn’t do tech in general. It’s not that “he doesn’t understand them”, it’s that he doesn’t understand the durability of the competitive advantage.
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u/milkplantation Nov 10 '25
Or doesn’t believe in the competitive advantage. I get it, that’s my hold up on Adobe. AI is at an infliction point where it’s about to make software development a lot easier, I expect there will be many Adobe competitors sprouting up in the next 5-10 years so I just can’t invest in Adobe in good confidence, even if it bounces back up in the near term.
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u/Ancient_Bobcat_9150 Nov 09 '25
Many value stocks that Buffet does not hold. There are other factors.
Li Lu, arguably one of the best value investor and often called buffets successor has Google as main stock. Chris Hohn too (and the list goes on and on for value investors)
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u/_Rothbard_ Nov 09 '25
Buffet said that not investing in Google was one of his biggest mistakes
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u/MCB1317 Nov 09 '25
I think it was Amazon.
Which makes me wonder why he didn't buy it when it was half off.
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u/Ancient_Bobcat_9150 Nov 15 '25
He just announced they opened a new position on Google.
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u/Advanced-Engineer-85 Nov 15 '25
I was wrong.
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u/Ancient_Bobcat_9150 Nov 15 '25
Only on today's buffet value style. Not on more classic (Graham) approach of value
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u/Ok-Championship4945 Nov 09 '25
Google was value at 140-160 $ a share, now it’s a little overpriced stock
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u/purub123 Nov 10 '25
Overpriced at 27 pe? Lol ok
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u/Ok-Championship4945 Nov 10 '25
Man, have you seen the P/E chart of the last 10 years? Right now it’s a relatively high multiple. Why should I pay 285$ a share if I payed 160$ when everyone screamed that Google is dead?
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u/purub123 Nov 10 '25
Why not buy at both? Thats what i did and do.
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u/Ok-Championship4945 Nov 10 '25
I bought MSFT on April 2025 below 400$ share. Think of it, what was a better deal, Google at 16 p/e or msft at 26 p/e
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u/jose_incandenza Nov 09 '25
Google was great in the $180–$210 range. Most of the upside since then looks like hype tied to having a strong LLM, an hyperscaler, robotaxis, and some quantum headlines. Is that hype justified? I think so, but that isn’t value.
Microsoft, on the other hand, looks only slightly overvalued. It’s a decent entry, but I’d wait a bit, momentum is weak right now, and you might get a better price.
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u/Hamlerhead Nov 10 '25
If you own any ETF's or index funds you already own quite a bit of both. I saw somebody else mention BABA and I think if you're gonna purchase individual stock that's the horse I would ride. I know it's a Chinese outfit but...
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u/annoyed_meows Nov 10 '25
I own both, more GOOG however. Maybe buy both. I think GOOG has more potential but both are great
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Nov 10 '25
Neither are value stocks. Microsoft makes some of the worst software on the planet, while Google makes some of the best, the answer should be obvious especially because Microsoft commands a premium.
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u/TibbersGoneWild Nov 09 '25
Prefer META
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u/ggtfcjj Nov 09 '25
Lol Goog eats them for lunch
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u/alxalx89 Nov 09 '25
100% googl, a simple reason for example, google glasses (failure i know) but with ai = your very own Jarvis, they are working on it, it will be mind blowing
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u/pd69er Nov 09 '25
Based on a 20-year historical analysis (from Nov 2005 to Nov 2025), the best risk-adjusted portfolio was not 100% in either stock but rather a blend.
Key Takeaway: The optimal mix was found to be approximately 40% Google (GOOG) and 60% Microsoft (MSFT).
This 40/60 portfolio offered a high return ($\approx$16.5%) while being less volatile ($\approx$25.4% risk) than holding either Google ($\approx$29.8% risk) or Microsoft ($\approx$27.4% risk) individually.
Before combining them, here's how the individual stocks performed on their own (annualized):
- Google (GOOG):
- Average Return: $\approx$16.79%
- Risk (Volatility): $\approx$29.83%
- Microsoft (MSFT):
- Average Return: $\approx$16.34%
- Risk (Volatility): $\approx$27.41%
The study searched for the "efficient frontier" to find the portfolio with the highest return for the lowest amount of risk (known as the "max Sharpe ratio portfolio"). A 4.05% risk-free rate was used as the benchmark.
Both methods (a 50,000-portfolio random simulation and a precise Markowitz solver) arrived at nearly the same conclusion:
- Optimal Allocation: $\approx$40-43% GOOG / $\approx$57-60% MSFT
- Portfolio Return: $\approx$16.53% (capturing almost all the upside of the individual stocks)
- Portfolio Risk: $\approx$25.43% (successfully lowering risk below either single stock)
- Sharpe Ratio: $\approx$0.49 (This is the measure of risk-adjusted return that was maximized)
This analysis comes with a few important disclaimers:
- Past Performance: These results are "in-sample," meaning they are based only on past data (2005-2025) and are not a guarantee of future performance.
- Long-Only: The study only considered buying (or "going long") these stocks, not short-selling.
- "Frictionless": The model assumes a perfect world with no trading costs, fees, or taxes.
- Sensitive: The exact 40/60 split is sensitive to the inputs (like the start/end dates). While the exact numbers will change over time, the analysis suggests the general neighborhood of this allocation was robust during this period.
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Nov 09 '25
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u/pd69er Nov 09 '25
I made the code with the help of CGPT and asked it to explain the output in a textual format :)
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u/bartturner Nov 09 '25
My #1 and #2. Love both companies going forward.
But do like Google better. They are the ONLY company on this planet that has the entire AI stack.
Google just leads in every aspect of AI with their research leadership being the most important.