Can This Stock Go Higher?

Is Oracle (Nasdaq: ORCL  ) headed higher, or lower? That's the question we ask when we evaluate insider buying and selling. We ask because the way executives spend their paychecks often reflects what they think of their companies' prospects.

Of course, not all buys are equal. According to two decades of research from Dr. H. Nejat Seyhun, compiled in his book Investment Intelligence from Insider Trading, buying is most predictive when it (a) comes from the CEO or other top-level executive, and (b) is performed in bulk. Seyhun judged buys of between 10,000 and 100,000 shares the most informative.

How do Oracle's managers measure up against Seyhun's benchmarks over the past year? See for yourself:

Insider Rating

Moderately Bullish
More open market sales than purchases, but some recent buys near or even above current prices.

Business Description

Market leader in database technology and seller of software businesses use to manage operations.

Recent Price

$23.86

CAPS Stars (out of 5)

****

Percentage of Shares Owned by Insiders

23.12%

Net Buying (Selling)*

($961,420)

Last Buyer (% Increase)

Jeffrey Epstein, CFO and Executive VP-Ops
1,000 shares at $25 apiece on Dec. 29, 2009
(Purchase bolstered direct holdings by 33%.)

Last Seller (% Decrease)

Loic le Guisquet, Executive Vice President
15,348 shares at $24.56 apiece on Jan. 5, 2010
(Sale represented 75% of direct holdings.)

Competitors

IBM (NYSE: IBM  )
SAP (NYSE: SAP  )
Sybase (NYSE: SY  )

CAPS Members Bullish on ORCL Also Bullish on

Cisco Systems (Nasdaq: CSCO  )

CAPS Members Bearish on ORCL Also Bearish on

Microsoft (Nasdaq: MSFT  )

Recent Foolish Coverage of ORCL

These Tech Stocks Will Make Me Rich
Oracle Won and Lost in Europe
2010's Best Tech Stock: TIBCO Software

Sources: Form 4 Oracle, Capital IQ, and Motley Fool CAPS. (Data current as of Jan. 28.)
*Open market sales and purchases only.

What we're tracking here, and why
Insider buying data can be confusing. Here, I'm concentrating only on buying and selling conducted in the open market. With most of these transactions, insiders control the timing. Other times they're buying or selling under the purview of a 10b5-1 plan. Either way, personal holdings are being bought and sold.

Those personal holdings matter the most -- they're the shares executives hold for investment, rather than compensation. Employee stock options are different; they're compensatory in the purest sense. I've stripped out options-related buying and selling from the calculations you see above.

The Foolish view: Moderately bullish
For Oracle, the question has never been whether it's a good business, but whether it's good enough to fend off stiff competition and emerging technology threats, such as Web-based business software from the likes of salesforce.com (NYSE: CRM  ) .

I'm a believer, if only because no cloud computing happens without a database. Oracle already controlled most of the market for on-premises, install-and-maintain database technology before its deal for Sun Microsystems was approved by the EU. Now that the Sun acquisition's been OK'd, Oracle gets access to more accounts that need the MySQL technology for cloud computing, making its sturdy competitive advantage even tougher.

I'm guessing that insiders would agree. But when it comes to how they vote their dollars, some insiders are more bullish than others. For example, Executive VP Loic le Guisquet has sold roughly 88% of his direct holdings since his last options exercise in July of last year.

Over roughly the same period, CFO Jeffrey Epstein has been buying. Today's stock price isn't much of a premium to what he's been paying. He's betting on upside, as am I.

I've held shares of Oracle for years, and I plan to continue to, valuation permitting. There's too much of a competitive advantage built into the business model. But that's also just my take. Do you agree? Disagree? Log into Motley Fool CAPS today and tell us how you would rate Oracle.

And if you want me to take a Foolish peek at the insider action of your favorite stock, email me here or use the comment box below. I'll write this column as often as you, our readers, demand.

Get more of the inside scoop with related Foolishness:

Microsoft and Nokia are Motley Fool Inside Value picks. Microsoft is also a Motley Fool Options recommendation. salesforce.com is a Motley Fool Rule Breakers recommendation. Try any of our Foolish newsletter services free for 30 days.

Fool contributor Tim Beyers is a member of the market-beating Rule Breakers stock-picking team. He owned shares of IBM and Oracle at the time of publication. Check out his portfolio holdings and Foolish writings, or connect with him on Twitter as @milehighfool. The Motley Fool owns shares of Oracle and is also on Twitter as @TheMotleyFool. The Fool's disclosure policy has its eye on you.


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