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:

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.

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