By Paul Price
Pessina bought 83,299 shares of Walgreen’s at $48.62 per share. This transaction totaled $4,049,997. It marks the first insider buy in WAG since 2008.
This is a great show of confidence as Walgreens now trades near its highest price since 2007.
Dr. Paul Price makes the case for buying Oracle (ORCL) in his Seeking Alpha article, Oracle Versus SAP: Valuations That Defy Logic. Paul argues that ORCL is undervalued. Especially compared to SAP:
S&P assigned a 4-star (out of five) buy rating to SAP with the shares at $77.21. They called present-day "fair value" as $70.90. Standard & Poor's 12-month price target? $78, a whopping 1.02% above the current quote. If S&P is correct, we'd see only a 2.23% total return over the coming year.
S&P puts ORCL's quality ranking in the top 1% of its entire research universe. It sees "fair value" as $39. That figure is 26.1% above last week's closing price. S&P inexplicably carries a 12-month target price of just $34.
S&P rates Oracle only as a "hold." Achieving even its lower, very modest, $34 goal would bring investors almost 10% from the present price, plus a yield of 0.8%. Many people would be quite satisfied with about 11% on a high-quality stock in our ZIRP [zero interest rate policy] world.
Paul notes that Morningstar also likes ORCL, giving it a 4-star buy rating and a $39 fair value estimate - same as S&P's. While Morningstar's analyst coverage currently leaves SAP temporarily unrated (for stars), it suggests that SAP is overpriced "based on a fair value that has been cut to 23.6% below the present price."
Paul continues,
My own preference for predicting future price action is to assume a regression to the mean on various metrics for the same company's shares. Note the valuations for ORCL at its previous "best buying opportunities" of the previous decade.
Oracle's P/E is now lower than any time in the previous 18 years, excepting the exact bottom in 2008-09... ORCL shares look extremely cheap based on P/BV and P/CF as well.
Oracle's outstanding results are not being reflected in its share price, which remains 15.3% under its 2011 peak. Meanwhile, SAP trades just pennies below last week's all-time high of $77.38. Swapping out of SAP and into ORCL makes sense. (Oracle Versus SAP: Valuations That Defy Logic)
We're adding 95 virtual shares of ORCL to Paul's Virtual Portfolio. 95 shares is about $3,000, representing approximately 3% of the initial value of the Virtual Portfolio.
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Here is a screenshot of the most recent update of the Virtual Value Portfolio:
Notes:
Paul began this virtual portfolio on 10/28, buying approximately $3,000 of the stocks listed in column A. The prices in column H are the closing prices on 11/28/12.
Paul added to ESRX on 11/7, taking this position to 5%. Paul increased the allocation of CLMS to 5% on 11/26.
*Originally, Paul’s virtual portfolio position allocations were approximately 3%. We put 70% of our virtual cash into 23 stocks on 10/28, 3% each. Paul raised ESRX’s allocation to 5% on Nov. 7. He similarly raised CLMS’s allocation to 5% on 11/26. (Rule: positions should not exceed 5% of a portfolio.)
Virtual profits taken on the ANF position on 11/15 at $41.80.
TAP added on 11/19 at $40.15.
**NEW ACTIONS**
See also: Market Shadows (11/25): From Fed, With Love. For the latest Market Shadows newsletter, click here.
I'm editor at Phil's Stock World, and editor for Stock World Weekly. My background is in the biological sciences, and law. After a brief career in the legal field, I changed directions and am now working as an editor, and very much enjoying my experiences in the editing world.
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