Fortune 40: The best stocks to retire on

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Despite continued softness in IT expenditures, the software titan, which has diversified from Windows into consumer products like the Xbox, has impressed analysts with its cost-cutting abilities over the last few months (including its first ever layoffs). The company has maintained a profit margin of 29%, compared with the industry average of 9%, and preserved a high return on equity of 26%.

Microsoft currently has a forward price to earnings ratio of 11 -- an attractive price for the cash-heavy, debt-free blue chip stock, which is trading at a discount to its competitors. "We expect the IT spending environment to remain tough, but we believe MSFT can offset some of the pressure with upcoming major product releases and further expense reductions," wrote David Hilal, an analyst at FBR Capital Markets.

--M.K.

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