On August 21st of 2013, I wrote a syndicated blog post for The Motley Fool which I linked here. In that post I suggested that investors consider building a position in the extremely unpopular shares of Oracle Corp (ORCL). At that time it was difficult to find a Wall Street analyst or financial news pundit with a positive comment on the stock. Most were convinced that legendary CEO, Larry Ellison had suddenly lost his mojo. He didn’t understand the “cloud” they exclaimed and wasn’t likely to recover from the misstep. Having watched Ellison and the company for some twenty plus years, I was unwilling to sell him short. He is a tough competitor and an outstanding leader. Love him or hate him, you simply can’t argue with his track record in building wealth for himself and his shareholders. I suggested in my post that he understood cloud computing and was in the process of making strategic acquisitions to right-size the company’s future.
Since that post the total return for the stock is a positive 28.5% versus 15.7% for the S& P 500.
Lest you think I am declaring victory, I am not. I’ve been investing too long to make that mistake. There will–at some point–be another problem. The stock will likely go through another period of difficulty. Which may just provide another opportunity for savvy investors to buy. When we own shares of great companies–what I call stocks to own for a lifetime– problems often create an investing opportunity. The question we learn to ask when these companies encounter operating hiccups and stock price declines is: does the management team have the financial and strategic wherewithal to solve the problem? The Wall Street crowd obviously has doubts which is why the stock price has declined, but often management is in the process of fixing the problem just when investors expectations and the stock price reach their nadir. Remember that Wall Street and the financial news pundits have a short-term focus. Ours should be long-term.
And, frequently, their disaster is our opportunity.