Larry Ellison is Tony Stark. He's a billionaire playboy philanthropist. He owns a Mig and flies under the Golden Gate Bridge. He is very popular with the ladies. So is Oracle (ORCL) Stark Enterprises? Is it a dominant company with a visionary founder?
Besides having a product that governments use around the world, one can argue that it's better than Stark Enterprises. It prints money and grows faster than Stark [last time I checked, General Dynamics (GD) and Lockheed (LMT) were growing at sub 5% clips].
Great moat. Competitive Advantages.
Oracle is number one or number two in many different sectors. It has almost 50% revenue share in the relational database market. Oracle Db dominates big enterprise, and Mysql is a favorite of startups and medium sized companies alike.
Enterprise services is growing rapidly. With the acquisition of PeopleSoft, BEA Systems, Hyperion, and Sun Microsystems, Oracle has managed to produce a company well situated to offer one-stop shopping for Database, Cloud, Customer Relationship Management, Enterprise Resource Planning, and Business Analytics. As of the end of 2011, Oracle is number one in business analytics, number one in CRM, and number two in ERP.
Oracle is one of the best in the business at acquiring and integrating. Since it routinely buys companies, it has the skills and experience to make sure the next acquisition is successful. It doesn't pay wild bids for companies like what Hewlett-Packard (HPQ) did for Autonomy. In fact, Oracle refused to buy Autonomy for about half the price Hewlett Packard paid for it. It successfully integrates companies within itself, as Oracle's market share and ROE indicates. Oracle's M&A skills should be very assuring to shareholders, because in tech, more than any other industry, merger acquisition is very important. Things change very quickly, and dominant companies may be yesterday's news if they make a couple missteps. Just imaging what Yahoo would be like if they bought Google or Facebook.
Great Management team.
Larry Ellison is a visionary. He founded and built Oracle into the company that it is today. It may be long forgotten today, but Ellison wanted to buy all of Apple (AAPL) way back in 1997. While similar bellwethers like Sun Microsystems, Cisco (CSCO), and Hewlett-Packard have faded into the background, Oracle is still alive and well. Its return beat both the S&P and S&P Information Technology Index index handily over the past 5 years.
Behind Ellison is former HPQ CEO Mark Hurd. He's the manager that Wall Street loves. Back in his former job, he controlled costs and instilled efficiency so well that HPQ fell over 12% on the day he left.
Buying Oracle is not without risks. Oracle likes to acquire. It is only a short time before Oracle will acquire something big and cause the stock to dip in the short term. Tech growth companies have volatile earnings reports. The last earnings report was a big disappointment. In the near term, this market right now looks like a momo market, where if it goes up, it goes up 3 or 4 days in a row or vice versa. There is a lot of volatility in the market right now and that might not be good for investors.
- Book value is $8.61.
- The dividend yield is 0.88%.
- Buyback program: 5 billion.
- The p/e is 14.31.
- The forward p/e is 10.33.
There is a strong floor at $26 and an even stronger one at $25. The moving averages are starting to tick up. If the market doesn't collapse, buying around the 25-26 level might be a good idea.
The buybacks and dividends are small compared to Oracle's peers. Oracle is a growth stock and is judged by the market as a growth stock. With a great management team and competitive advantages, Oracle should be a good long term investment. It might even be a better investment that Stark Enterprises - just don't tell Tony Stark that.
(Data from Finviz, Oracle 10-k 2011, and theStreet.com. The aforementioned material is not investment advice. Please make your own conclusions before investing.)