Cramer's Stock-Picking Secret
In this volatile market, investors need an edge, Cramer said on Monday's "Mad Money."
"So allow me to let you in on a little stock-picking secret from back at my old hedge fund days: When analysts fight, you profit," Cramer said. "Analysts often aren’t much use to us when they all agree about a stock. It’s when they disagree that they can add real value; when they clash opposing ideas against each other [to] figure out who’s got the strongest case."
Analysts currently can't agree on Oracle , Cramer said. On Friday, RBC downgraded Oracle from 'outperform' to 'sector perform.' Shortly thereafter, Credit Agricole upgraded Oracle from 'outperform' to 'buy.' FBR added Oracle to its top picks list on Monday. The conflicting calls provides an opportunity to evaluate the best bearish and bullish arguments, Cramer said. In doing so, we can determine whether ORCL is a buy.
So why did RBC downgrade Oracle? The firm is concerned about its combined hardware and software strategy, Cramer said. RBC thinks Oracle's operating margins could peak once it finishes rationalizing its Sun Microsystems acquisition. It is also worried about competition from IBM , SAP and Hewlett-Packard .
The bullish case for Oracle notes that the stock has taken a pounding lately. It sells for 11 times forward earnings, which is cheap considering its 15 percent growth rate. Its historical average multiple is roughly 16 times earnings, so this stock is very cheap right now, Cramer said.
Oracle has exposure to strong end-markets, high returns and a solid balance sheet, Cramer said. Its new products will likely help it take market share and drive double-digit earnings growth, he added.
So what's the bottom line?
"RBC’s downgrade of Oracle, in my opinion, was wrong," Cramer said. "Credit Agricole and FBR are right to like the stock. I like it, too, and think it’s one of the few tech names that’s worth buying in this environment until seasonality goes in tech's favor, which isn't for another four weeks time."
When this story was published, Cramer's charitable trust owned Oracle
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