Oracle (ORCL) has continued to perform well all summer. It has been growing well through smart purchases and its latest acquisition, SelectMinds, shows how the company continues to grow through creating new forms of licensing revenue opportunities. Capitalizing on Oracle's sharp moves allows a savvy investor to make money through long term investing but also short term income opportunities.
Acquiring SelectMinds Opens Up Licensing Revenue Stream
Oracle acquired SelectMinds, a cloud-based social networking company used by recruiters. This acquisition will compliment the largest purchase Oracle has made, Taleo Corp last February. Taleo also helps businesses recruit and track job applicants. What is Oracle's strategy here? Social Networking will be the means by which companies look for new employees. Thomas Kuran, an executive VP, summed up the company's thinking this way:
"Recruiting candidates through employee referrals is widely acknowledged as the most effective method to find talent through trusted contacts. Making recruiting efforts efficient and seamless by leveraging social connections and through mobile applications helps companies find better quality candidates and continue to build the pipeline for future talent."
The deal gives Oracle the opportunity to engage deeper in social networks and mobile. With SelectMinds, customers can transform job posts into a mobile job post that's viewable and sharable on smartphones. These two companies together, Oracle and SelectMinds, will create a comprehensive recruiting, candidate sourcing, and talent management offering for organizations to reach high quality referrals through social networking.
As an old software licensing stalwart, Oracle has used its move to the cloud to open up numerous licensing opportunities of which the recruiting industry is but one. Oracle has managed to plan and develop a revenue stream. The company's net income has been increasing for three straight quarters, and in the last quarter, it rose by 7.6% from a year earlier. Analysts are projecting a growth this quarter of more than 13%.
Oracle has been on a healthy bullish run since its low in mid May. Since that time, it has moved from 25.5 to about 33 -that's a very impressive 29% run. The RSI has remained in bullish territory through this whole move. Even on the dips, it has remained above 50, which reveals the strength of the run. The MACD has consistently stayed above 0, and supports the move. The stock has used the middle Bollinger Band as a support until recently. On its last dip it touched the bottom band. This may signify the end of the first leg of the move up. It is now into its second leg and this one is usually a bit shorter than the first. But all indications point to a continued bullish move, at least from a technical perspective.
The Options Play
Presently trading at 33.12, I would be apt to trade with the trend. Since net income is expected to continue to rise, I would look at a bullish income play.
- Buy a December 2012 call with a strike price of '33' (priced at $1.61)
- Sell a December 2012 call with a strike price of '34' (priced at $1.10)
- Net Debit to Start: $0.51
- Maximum Profit: $0.49
- Maximum Risk: net debit
- Maximum Length of Play: 3 months
Reasoning behind the Trade
- Playing into the long/strong trend
- Net income continues to grow.
- I see no catalyst to hinder its present move up.