has been buying companies like crazy lately. What's next? I've identified the stocks I believe to be likely targets and compiled them in a portfolio,
, on Stockpickr.
There was a time I loathed Oracle. Not the stock -- back when I hated Oracle, I barely had a clue what a "stock" was. It was 1994, and I was programming what eventually became the Full Service Network, an interactive TV setup in Orlando, Fla.
The digital project was an expensive experiment for
, which was testing to see if it could roll out the network across the country. I asked my boss at the time why it was we didn't just perform all the network and interface work through the Internet by using Mosaic as the interface. (Mosaic was the precursor to Netscape.) He said to me, wisely, "James, the Internet might be good for academic types and nerdy types, but these cable guys are smart. Just let them do their thing."
In any case, the experiment was a disaster, but at least I did my part, which was plowing through what felt like hundreds of manuals about Oracle in order to write the slightest pieces of code.
It was such an immensely complicated process that it felt to me as if Oracle made it complex so it could charge more. I had just left grad school in computer science at the time, but I still had a hard time making heads or tails of the manuals.
This is why it doesn't surprise me that Oracle has been on an acquisition spree over the past several years. It needs to basically bolt on every enterprise application it can find, so if the need for its core database product ever wavers, it has other products it can hang on to.
And waver it will. MySQL is a far simpler database management system to use, and increasingly getting as powerful. It's not enterprise friendly yet, but it will get there. The Stockpickr site, for instance, is built on top of MySQL.
In any case, Oracle in the past few years has bought mega-cap firms such as human resources software company PeopleSoft and customer relationship management software provider Siebel Systems. More recently, it's in the
process of acquiring
One company that I bet is on Oracle's radar is
Progress makes software that helps integrate disparate application software packages. For example, if you have Oracle applications on one computer and legacy mainframe databases on another, Progress' software can help integrate them and others.
The company has $241 million net cash in the bank and trades at just nine times cash flows despite estimated double-digit growth. Oracle could buy this company for up to 12 times cash flow, a 33% premium, and the acquisition would still be accretive, particularly when making use of the cash that Progress Software has in the bank.
Noted deep-value investor Bruce Sherman of Private Capital Management also owns a stake in the company. Sherman's fund has been up 20%-plus a year since it launched in 1986 and has had the dubious honor of having owned perhaps more companies that have been sold to Warren Buffett than anyone else.
Although Sherman typically owns nuts-and-bolts value companies, he more recently has been buying select tech companies that he considers to be in value territory. For instance, a new position for him is
. For the rest of his positions, check out the
Sherman, along with a few other notable investors, also owns another stock that's on the
Symantec, a provider of security and storage software, devices and services, is the largest company on this list, with a $15 billion market cap. But it wouldn't surprise me to see Oracle buy the company. Symantec has gone from highflier to cheap because of its poor integrated storage company Veritas.
Oracle, on the other hand, has mastered the integration process, smoothly latching on PeopleSoft and Siebel despite disparate corporate cultures and even a hostile battle for PeopleSoft. Symantec, at nine times cash flows, could be the next in line for a hostile battle.
One of my favorite investors to piggyback,
, is invested in Symantec. Icahn, who recently
made an offer to buy
( WCI), generally follows a policy of building his position, watching and then pouncing. Maybe he will do the same with Symantec if it continues to flounder.
Goldman Sachs analyst Abby Joseph Cohen is also a fan. In a recent
Roundtable, she stated: "The stock sells for about 18 times 2007 earnings. Clearly, P/Es are not what they used to be in this category. The stock performed roughly in line with the overall market in 2006, but longer-term earnings growth is on the order of 16%-17%, which is substantially better than the
To see the rest of Cohen's comments and what other stocks she likes, check out the
And to see the other companies I believe Oracle should consider buying, check out my
Stockpickr tip of the day:
I want to also describe one more experience I had with Oracle. In 1994, I was helping HBO get on the Internet back when nobody really had Internet access.
I figured out how to connect my work computer to my dial-up account (there were no firewalls), and I downloaded Mosaic. Then I used Oracle to make an application that made a Web interface using Mosaic to catalog HBO's movie database, which was stored in Oracle. If you clicked on, for instance "Star Wars," you would get back all the actors and actresses in the movie (and all their contractual relationships with HBO). Then, by clicking on one of the actors in the list, you'd get back all the movies he or she was in.
As far as I know, it was the first real movie database on the Internet (although it was just internal to HBO at the time). But, as anyone who's seen Stockpickr knows, my sense of how to navigate a Web site hasn't changed much in the past 13 years. You click on a fund and get all of its holdings. Click on a holding and get all the funds in it.
There are several brand-new features we're testing today at Stockpickr.com. It's "beta" today but "1.0" tomorrow. I'll describe one of those features, portfolio tracking, in more detail tomorrow.
At the time of publication, Altucher and/or his fund had no positions in stocks mentioned, although positions may change at any time.
James Altucher is a managing partner at Formula Capital, an alternative asset management firm that runs several quantitative-based hedge funds as well as a fund of hedge funds. He is also the author of
Trade Like a Hedge Fund
Trade Like Warren Buffett
. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Altucher appreciates your feedback;
to send him an email.
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