Oracle Corporation (ORCL, Financial)
The sell-off in the software sector provided us with an opportunity to purchase shares of Oracle this quarter. Although investors have generally admired Oracle’s stability and its strong customer relationships, they have also viewed it as a slower growth software company. We believe Oracle’s reported financial results have been depressed in recent years by its transition to the cloud, the benefits of which are finally becoming visible. Oracle’s cloud-based application businesses are now growing 25-30% organically, and its cloud-based infrastructure businesses are growing even faster. As these businesses have become a larger percentage of revenue, the company’s overall growth has also accelerated. In our view, the stock price does not yet reflect this stronger growth outlook and the shares are undervalued today at just 14x our estimate of normal earnings.
From Bill Nygren (Trades, Portfolio)'s Oakmark Select Fund fourth-quarter 2022 commentary.
