Brave Warrior Capital’s Top Stock Picks Include Oracle Corporation (ORCL)

Greenberg had 5.4 million shares of Oracle Corporation (NASDAQ:ORCL) in its portfolio at the beginning of April. Oracle Corporation (NASDAQ:ORCL) has been recording earnings growth in recent reports, though this has come almost entirely through higher margins as the top line’s performance has been sluggish; further improvements in net margins may not be sustainable. However, the stock is arguably cheap with trailing and forward earnings multiples of 14 and 10, respectively, and so it does not need to improve its net income much. Billionaire Ken Fisher’s Fisher Asset Management had about 19 million shares of Oracle Corporation (NASDAQ:ORCL) in its own portfolio (find Fisher’s favorite stocks).

Brave Warrior rounded out its top five picks with 8.8 million shares of investment broker Charles Schwab Corp (NYSE:SCHW). Charles Schwab, following a more than 75% gain over the last year, looks fairly expensive in earnings terms- for example, it is valued at 26 times consensus earnings for 2014 (and analysts seem to be expecting considerable improvements in EPS to get to that point). Net income grew by 6% in the first quarter of 2013 versus a year earlier, and we are skeptical that is a high enough growth rate to justify the current valuation.

As we’ve mentioned, we aren’t fans of Valeant at its current price and would hold off on VistaPrint and Charles Schwab as well- the former has had the markets set a very high bar, while the combination of decent performance but high multiples at the latter is unattractive. Oracle Corporation (NASDAQ:ORCL), on the other hand, has low expectations in the market and so even with its business being flat might be worth investigating; Express Scripts also has a good deal of potential given its industry.

Disclosure: I own no shares of any stocks mentioned in this article.