The Consensus Opinion on Oracle: Slightly Bullish

Oracle (Nasdaq: ORCL  ) has a market cap of $170 billion and more than 370,000 customers in more than 145 countries. It will surprise exactly no one that the company attracts a lot of institutional and retail investor interest. What did surprise me, though, was that last year, it was the No. 13 most-owned stock by investment clubs, as measured by the folks at Better Investing. If retail investors were high on the stock, it got me to thinking: What's the consensus sentiment view on Oracle?

Turns out the view is slightly bullish. Let's have a look at a few of the key sentiment drivers.

1. Analyst opinion
Analysts love Oracle. Data from Capital IQ captures their collective feeling:

Analyst Call

Number

Buy 22
Outperform 10
Hold 9
Underperform 0
Sell 1
No Opinion 4

Thirty-two analysts have either a "buy" or an "outperform" rating on the stock -- by far the majority sentiment. With nine neutral "holds" and a lone "sell," we'll classify analyst sentiment as bullish.

2. Insider buying
Next we'll look at insider buying and selling. Here, the picture isn't as rosy. Over the past year, Oracle insiders have sold $1.9 billion (that's billion, with a b) worth of their company stock. During the same time period, insiders bought $81,000 worth of the stock. (Data from Form4Oracle.)

Even though $1.89 billion of net insider selling is but a small sliver of Oracle's $171 billion market cap, and although insiders sell stock for a whole host of reasons -- to pay for a house or tuition, to diversify assets, and so forth -- it'd sure be nice to see less insider selling. It'd also be nice to see it balanced out by more insider buying. For purposes of this exercise, we'll classify insider buying/selling as bearish.

3. Guru buying
Next, we'll look at "guru" ownership of the stock, according to GuruFocus.

In the quarter ended Dec. 31, two investing gurus were buying Oracle shares: George Soros and Chris Davis. However, four gurus were reducing or eliminating their Oracle stakes in the quarter, among them John Hussman and Ruane Cunniff. In the previous quarter, six gurus were trading Oracle: three buyers, three sellers.

It's close, but the consensus action has been "sell," so we'll classify guru buying sentiment as bearish.

4. Retail-investor community sentiment
For retail-investor community sentiment, I turn to Motley Fool CAPS, our proprietary stock-rating system. CAPS generates ratings on a one- to five-star scale, with five stars as the highest ranking, an indication that the Fool community believes in a stock's future. That's mostly the case for Oracle: The stock has a four-star rating.

5. Short-sellers
Next we'll look at whether short-sellers are circling the stock. There are 25 million Oracle shares sold short, according to Capital IQ. As a percentage of shares outstanding, that's a short interest of 0.5%. That's not at all high, and so for determining sentiment, we'll classify the low short interest as bullish.

6. Does Buffett own it?
This is the "cherry on top" test, and in this case, it's a no: Berkshire Hathaway does not own shares of Oracle. That's no surprise, though, given Warren Buffett's famous aversion to technology stocks.

Adding it up
The consensus opinion on Oracle is "slightly bullish." Analysts love the stock, and the CAPS community believes in it. In another bullish sign, short sellers are staying away. But insiders have been selling in huge quantities, and gurus have been selling more than they've been buying. Berkshire's not a holder, either.

Of course, you can't base an investment philosophy on who likes or dislikes the stock you own, and even a consensus bullish opinion can sometimes be a scary thing. Quoting Buffett: "A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful."

The purpose of this series of articles isn't to make a definitive buy-or-sell call on Oracle. Rather, by looking at a stock's sentiment, the goal is to help you place your own opinion of it in a broader context.

One final thing: If you want to keep tabs on Oracle's movements, and for more analysis on the company, make sure you add it to your Watchlist.

Fool.com managing editor Brian Richards owns no shares of any companies mentioned. Berkshire Hathaway is a Motley Fool Inside Value and Motley Fool Stock Advisor recommendation. The Fool owns shares of Oracle and Berkshire Hathaway and has a disclosure policy.


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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On February 26, 2011, at 11:06 PM, tomd728 wrote:

    Just a comment on "guru" investors exiting ORCL.

    If we agree that this bunch does not have an endless supply of cash it could and probably is a

    re-apportioning of portfolio that requires some selling to raise cash for the purchase of other securities or simply cash to be sidelined until ?

    The growth of ORCL is not dependent on the "gurus" and when I see performance #s from

    some of these managers I am usually elated to have listened to other opinion !!!!!!!

    Tom

  • Report this Comment On February 28, 2011, at 10:57 AM, islandman1013 wrote:

    Oracle! My lesson with owning Oralce stock is that if you invest in a good growth company that it truely takes patients to get the big returns. Buy and hold maybe out of fashion, but it sure worked for Oracle. The hard part is finding really stocks like Oracle.

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