If you're looking for good investment ideas, one great source can be your daily life. (There's a reason people keep quoting Warren Buffett's "invest in what you know" quip.) In that vein, the Motley Fool Money team field a question from a young listener looking to move from her old investment strategy -- all ETFs -- to picking stocks. She has noticed that at her employer and those of her friends, software-as-a-service players salesforce.com (NYSE:CRM) and Oracle (NYSE:ORCL) seem to be mission critical. But how, she wonders, do they look as investments?
In this segment of the Motley Fool Money podcast, host Chris Hill and senior analysts Andy Cross, and Aaron Bush discuss the pros and cons of each, and explain which one gets their vote.
A full transcript follows the video.
This video was recorded on Jan. 11, 2019.
Chris Hill: Question from Maddie Peering in New York City. She writes, "As a fairly recent grad, I've started to take a stronger interest in my investment portfolio. Currently, it mostly consists of ETFs. I wanted to get your thoughts on stocks such as Salesforce and Oracle. I found these two systems to be lifelines in my current company as well as many of my friends. Also, at first glance, they seem to be reasonably priced and growing. Would love to get your thoughts on investing in them or what you see in their futures." A great question. And kudos to Maddie for taking hold of her financial future. Aaron Bush, Salesforce, Oracle, what do you think?
Aaron Bush: First of all, I just want to say congrats on having that level of awareness. There's totally value in looking around at your daily life and finding companies that are relevant. In particular in this case, you're starting to see the investment merits of enterprise software companies in general. They're increasingly relevant, they're mission-critical, they're very sticky. Software at scale is very profitable.
The next step I'd challenge you to think about is, which of these software companies is defining the future? Typically, it's smaller companies still ramping up, but sometimes it's the larger companies that fit the mold, too. I'd say Salesforce in particular is one of those companies that fits the mold. It's the world's leading provider of customer relationship management software. It has a massive backlog of companies that want to work with it. It continues to improve its platform. Oracle is more legacy. It probably isn't defining the future as much as Salesforce. A lot of that is because it started back in the 80s. It's had a tougher time taking advantage of the cloud, and new database technologies like what's coming from MongoDB, for example, are potentially threatening. That said, it's still a respectable company and a lot of businesses rely on. It has resources to reinvest. But if I had to pick one of those two, I'd probably lean toward Salesforce.
Andy Cross: Agreed. Salesforce is a $112 billion company. Oracle's a $170 billion. They're catching up to it. From a valuation perspective, it's more expensive, but it's also growing far faster at 25%, 30% a year.
Aaron Bush owns shares of MongoDB. Andy Cross has no position in any of the stocks mentioned. Chris Hill has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends MongoDB and Salesforce.com. The Motley Fool owns shares of Oracle and has the following options: long January 2020 $30 calls on Oracle. The Motley Fool has a disclosure policy.