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5 Stocks Seth Klarman Loves

Stocks in this article: ORCL GNW HES HPQ BP

Oracle

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So what's Baupost's favorite stock? Right now, it looks like Oracle (ORCL), the $156 billion enterprise software giant.

In the second quarter, Baupost picked up 15.8 million shares of Oracle, for a $469 million stake in the newly initiated holding, committing a very hefty 12.3% of Baupost's stock holdings to the firm. That bet appears to be paying off too -- in the last quarter, shares of Oracle have rallied more than 25%.

>>4 Tech Stocks Set to Shine

Oracle's biggest business is application software; the firm sells mission-critical software packages to firms that need database tools for everything from customer resource management to supply chain analysis. Because Oracle's software is integrated so tightly into firms' operations, customers have extremely high switching costs and competitors have big barriers to entry. Oracle's entry into cloud computing has also caught considerable attention in the industry. Hosted versions of Oracle's software could open the firm up to a significant source of recurring revenues in the next couple of years.

From a financial standpoint, Oracle is in stellar shape. The firm has nearly twice as much cash on its balance sheet as it does debt, a ratio that's only been growing in recent years. With growth-by-acquisition central to Oracle's business strategy, this firm has plenty of dry powder to add onto its empire.

Oracle also shows up on a recent list of 5 Dividend-Paying Stocks for the Next Decade.

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