Value Investor Scott Black Makes the Case for Investing in Oracle
Noted value investor and Barron’s Roundtable regular Scott Black, president of Delphi Management was on Fox Business News extolling the virtues of Oracle (ORCL).
Black said he just spoke with the management of Oracle last week. “When you look at the fundamental business which is the software, it will grow at a 6 or 7 percent clip even in a slow growth IT type of environment,” Black stated. “You back out the cash which is over $3 a share you have about $29 1/2 net with $2.90 of earnings in May of next year; its a 10 PE,” Black added.
Black addressed concerns regarding Salesforce.com and Workday in the cloud, but touted Oracle’s full service product and said they were not behind with the cycle times for releases being comparable to their competitors. Salesforce.com is selling for over 100 times next year’s expected earnings and Workday’s PE is infinite, Black said.
Oracle generates $10 billion in free cash which is dollar for dollar with earnings, and its an excellent, well-run company, Black said. ORCL is ridiculously cheap and doesn’t get much respect, Black added.
Black talked about the difficulty identifing value stocks with the market trading near its all-time highs. He said they’re looking for companies with high returns on equity and sustainable earnings power, while trading at no more than a 12 PE.
Another stock mentioned during the interview was Express Scripts (ESRX).
When asked it he was calling a top in the market, Black responded, “we’re more like Warren Buffett, we’re not smart enough to know if the market is going up or down.”
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