Is MSFT a “Baby Thrown Out with the Bath Water” Stock?

Polen Capital’s Q1 2026 investor letter flagged Microsoft (MSFT.OQ) as a “baby thrown out with the bath water,” arguing the stock is undervalued amid AI-related investor panic. The letter notes MSFT’s valuation near ~20x 12-month forward earnings—comparable to Exxon—despite Microsoft generating roughly 4x Exxon’s operating profit, ~2x free cash flow, stronger earnings growth and greater stability. The Polen Focus Growth Strategy, which fell 17.16% in Q1 versus -9.78% for Russell 1000 Growth and -4.33% for the S&P 500, is adding to software and semiconductor positions and remains confident in mission-critical, recurring-revenue businesses. MSFT closed at $429.25 on April 28, 2026, with a one-month return of +16.21% and a 52-week gain of +8.60%, market cap ~$3.19 trillion. The letter’s view could support renewed investor interest in MSFT as a long-term buy amid AI-driven volatility.