Chasing Value: Oracle Insiders Selling as Stock Hits 52-Week High

Posted Oct 19th 2010 10:20AM by Sheldon Liber
Filed under: Earnings Reports, Management, Insiders, Hewlett-Packard (HPQ), Oracle Corp (ORCL), Chasing Value™

It was only a month ago I wrote a story comparing Oracle Corp. (ORCL) and Hewlett Packard (HPQ), concluding the latter to be the better opportunity from a value investor's perspective. At the time Oracle was $27.49. Yesterday it closed at a new 52-week high of $29.23 -- a gain of 6.33%.

During this time, Oracle insiders have been selling shares and the trend is negative. In September alone, almost $300 million of the stock was sold off. If you examine Barron's weekly summary of insider activity, as one source, you will find that Oracle has been in the top five companies on the sell side for many weeks. As the stock has been rising, insiders have been selling into strength.

This is probably a wise move for them, and something private investors should take into consideration before dreaming of profits if the stock -- as I have suggested and insiders have supported -- reverts to the mean.

Larry Ellison, the founder, chairman and CEO of Oracle has proven to be a shrewd leader, investor, and innovator over three decades, and there is no reason to believe that the company will not continue to be a tech leader. However, in the short run, there are a lot of challenges, including increased competition from home and abroad.

The addition of Mark Hurd (formerly with HP) as president strengthens the management team and will aid in facing these challenges, but he will not be able to make them go away.

Oracle reported earnings last month that beat analysts' estimates by 5 cents. They are definitely on a roll, but current shareholders, taking a cue from insiders, might want to take some profits too. Those interested in adding Oracle as a core holding might wait for a pullback in the stock price or consider dollar-cost averaging over time on dips.

Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture and planning firm. He writes the columns Chasing Value™ and Serious Money. Disclosure: He does not own ORCL or HPQ stock.