As I write (3:15am PST), panic has enveloped financial markets around the world. Germany, England and France are all trading down ~2% and US Index Futures are down between 2.25% and 2.75%. In other words, everybody is going to be selling stocks at the open this morning – but not me. I am by no means advising going all in but I will likely be putting on a small position in old school software powerhouse Oracle (ORCL) ahead of its earnings this afternoon.
ORCL worked for me last year and its pivot to the cloud makes strategic sense to me. I see them earnings$4.50/share in calendar 2022. At a closing price of $67.14 Friday, that’s a 15x multiple on forward earnings. In fact, given the selloff in the futures, you can almost certainly get ORCL cheaper than that this morning. In addition, ORCL pays a 1.91% dividend.
So while everyone is panicking and dumping their positions, I’m slowly accumulating stock as I believe too much Fed tightening is being priced in. Maybe Powell is Volcker 2.0 but with the market starting to crack he will soon be faced with the choice of crushing inflation and accepting a nasty recession or waffling to some extent in the face of crashing financial markets and their ripple effects into the real economy. (Indeed, this Wednesday’s Fed Decision will be interesting on that front.) That’s when we’ll know how strong his resolve to beat inflation really is.