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Three Reasons Oracle Is a Wise Choice

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The company has taken out analyst estimates this past year and is likely to do it again in the third quarter.

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I guess the good news is that it's a short week!

Asian stocks were mixed overnight. The Hang Seng finished down 0.11%. But the Nikkei was up 0.21%. Meanwhile European stocks were in positive territory early this morning. And here in the US we are currently trading higher.

Here's what I'm focused on this morning:

Oracle (ORCL)
Apparently Larry Ellison's baby landed a nice write up in Barron's, which could have a positive impact on the shares in today's session.

My latest take on the California-based company:

1. I'm certainly not going to belly up just because Barron's commented. However, I do like the company and the stock at these levels and think it would be more fairly valued at or just over $30.

2. It's done a solid job of taking out analyst estimates this past year (it beat in three out of four quarters) and I think it's got a good shot to exceed expectations here again in the third quarter. The current estimate if $0.37.

3. As far as the Sun deal is concerned, I'm quite hopeful that there could be a slew of cost savings that could give the bottom line a nice little goose. However, I'm also hoping that Oracle keeps the investment community in the loop as to how things are going because Sun is big fish to swallow, and with big fish can sometimes come problems -- and possibly indigestion.

Abercrombie (ANF)
Check out the retailer's fourth-quarter numbers.

Excluding items it put $0.91 a share on the scoreboard, which exceeded the $0.87-per-share estimate.

My thoughts:

1. I realize that everybody seems to be fawning over the chain lately, but I just can't figure out exactly why. Its clothes, while attractive and of good quality, are a bit pricey for this environment and the penny-pinching consumer. From an investment standpoint, the company trades at more than 20 times this year's estimate, which I think is too steep a price to plunk down.

2. I don't know when, where, or how, but I think the company will eventually trip up and disappoint the Street on some level, and that the stock will get a hefty pummeling from current levels. Also, while I know the bulls will disagree with me, I'd much rather belly up to a discounter. But if asked to pick an apparel chain, I'd go with Gap (GPS) at this point.

Intel (INTC)
Justin Sharon points out this morning that Auriga bumped up its rating on the chip giant to Buy.

I continue to believe that the shares compute in a big way. I think the upgrade will certainly help the situation. But I'm also focused on earnings and thinking that the company will continue taking out analyst estimates here in 2010. If I'm right, a new high may be just around the corner. Note that the recent 10,000 share purchase by a director -- a terrific sign in my book.

Panera Bread (PNRA)
Justin Sharon also points out today that Barclays goosed its rating up to Equal Weight.

While the company has done a decent job taking out Street estimates and the stock has been performing well, I don't feel it makes sense to belly up at these levels. At 21.6 times this year's estimate, it's just way too pricey and I see too much risk.

If you follow this column then you know that I'm much more interested in McDonald's (MCD) and its prospects in the next year, and I'm excited about the stock's potential. If I were long Panera Bread, I'd use this news as an opportunity to head for the exits.

Have a great day!
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No positions in stocks mentioned.

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