Bullish on Oracle for short term
October 20, 2008Oracle’s plan to buy back shares lifts its stock price. But I don’t like it one bit. According to its cash flow statements, Oracle generates quite some cash from operations. So I might think they can afford it. Can they? Should they?
Like many other companies, Oracle (ORCL) recently has hit a 52-week bottom. On the other hand, it is close to the market high of 2006 and above the market highs in 2005, 2004, and 2003. In 2000, the stock price was more than twice the amount it is now before losing 80% of its value between 2000 and 2002.
Looking at insider transactions on Yahoo!Finance, I realized that the last purchase by insiders was done in April 2008. Since then insiders either sold stocks or traded options. The highest option price listed is $14.57 per share. Given that we are in the middle of the quarter and most likely in an open trading window, I expect insiders will be selling.
While artificially propping up the stocks might be good for the insiders, buying back stock wastes company money. Oracle could use this money to better position the company for the long-run and to weather the storm we are still in. This might better prevent another eighty percent drop in the stock price and benefit all investors instead of just a few. While I predict up on PredictWallStreet for the short run, my long-term prediction is down. I do not trust companies that use company money to generate personal returns.
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