A first look at Oracle; Thousands of investors have been duped by Chinese stock scams; Jim Chanos echoes my warning about bitcoin play Strategy

1) At the suggestion of both one of my readers and a smart friend, I took a quick look at software giant Oracle (ORCL). The stock has been an exceptional performer over the past decade, up close to 400% – and as you can see, most of that gain has been in the past four years:

Here's a LinkedIn post my friend sent me, which summarizes Oracle's growth:

Oracle hit a record market cap of $586B and [co-founder] Larry Ellison owns >41% of the company ($240B), making him [the] 2nd richest person in the world. At the end [of] 2010, Oracle [was] valued at $87B and Ellison owned ~27% of it ($24B).

How did his ownership of Oracle increase over that span? Since 2011, the company has spent ~$155B on buybacks – mostly using free cash flow (with some debt) – and reduced shares outstanding from over 5 billion to under 3 billion.

Ellison didn't sell into the buyback program and increased his stake from 27% to 41% (he owned 34% of Oracle at its 1986 IPO).

Depending on the pace of buybacks, Ellison could own a majority of Oracle in a few years amidst the AI boom that has been huge for Oracle's data center business (ORCL is up more than 3x in [the] last 5 years).

As is usually the case, the stock has followed earnings, which were flat for the better part of a decade but have taken off over the past three years:

Free cash flow ("FCF") has largely mirrored net income – except for fiscal year 2025, as capital expenditures ("capex") spiked due to an aggressive infrastructure spending spree to cement the company's place in the AI and cloud market:

Investors believe this capex investment will pay off in future growth and profitability – and they're pricing the stock accordingly, as it's richly valued: At yesterday's close of $211.10, it has a $604 billion market cap and, adding in net debt, a $696 billion enterprise value ("EV").

Its EV is 12.1 times trailing revenue and 27.4 times earnings before interest, taxes, depreciation, and amortization ("EBITDA").

Analysts expect the company to earn $6.75 in earnings per share in the next 12 months (up 11.9% year over year), so the stock has a price-to-earnings ratio of 31.3 times.

As I'll discuss in tomorrow's e-mail, I think other tech giants have better growth prospects yet trade at a lower valuation, so I'm not tempted to buy ORCL at these levels...

2) This Wall Street Journal article reinforces what I've been saying for years: There's too much fraud among Chinese companies listed on U.S. stock exchanges, so investors should beware. Obscure Chinese Stock Scams Dupe American Investors by the Thousands. Excerpt:

Wall Street veterans say the pattern has been repeated dozens of times in recent years, and feeds on tiny Chinese stocks that are vulnerable to manipulation and easily bought by U.S. investors.

Traders and investigators say it has become an epidemic of fraud, frustrating U.S. regulators who typically can't get access to evidence in China, even though the companies market their stock to investors in the U.S.

As the article continues, many of these companies resemble pump-and-dump schemes:

Victims are typically recruited through social-media ads or messages on WhatsApp advertising investment advice. Unlike as in many other online scams, they are told to buy shares in real companies, often obscure Chinese firms that fizzled after going public on U.S. stock exchanges.

The investors are duped into believing the company is on the verge of something big, perceptions that are reinforced by short-term gains in share prices engineered through manipulative trading. The sellers are often a ring of traders who bought the stock at much cheaper prices, sometimes directly from the companies, and want to dump it on the unsuspecting victims.

In my May 21 e-mail, I wrote about several different ways to lose money fast – and how to avoid them. To protect your wealth, it's crucial to identify and steer clear of fraud. Bottom line, avoid these types of stocks at all costs!

3) Speaking of stocks to avoid, I warned about bitcoin play Strategy (MSTR), formerly MicroStrategy, in my January 28 e-mail. And my old friend, famed short seller Jim Chanos, echoed my warnings in a recent Bloomberg interview: Chanos Hits Back Strategy's Saylor, Calling Him a 'Salesman'. Excerpt:

Famed short-seller Jim Chanos denounced Strategy's Michael Saylor for using a misleading model to value his crypto-treasury firm and reemphasized his recommendation to short its shares and buy Bitcoin instead.

"Michael Saylor is a wonderful salesman," Chanos said during a Bloomberg TV interview on Wednesday. While the executive chairman of Strategy argued his business should not be valued just on the basis of its Bitcoin holdings, Chanos called that "financial gibberish."

"This is akin to saying my house that rose in value from $450,000 to $500,000 last year is not worth $500,000. It's worth $1.5 million because it is worth $500,000 plus a 20 multiple on the $50,000 increase," Chanos said. "Of course, that's absurd. But that is the claim he is making."

Like I said in my previous e-mail on Strategy, "I'm particularly wary of any stock or fund in which you're paying $2 for $1 worth of the cryptocurrency."

Best regards,

Whitney

P.S. I welcome your feedback – send me an e-mail by clicking here.

P.P.S. For readers interested in following my run to become New York City's next mayor, I'll close today with a quick update...

It's encouraging to see the positive words for my mayoral run from the New York Times editorial board (with primary day only a week away)! Here's the article: Our Advice to Voters in a Vexing Race for New York Mayor. Excerpt:

The next tier of candidates includes Whitney Tilson, a moderate Democrat and former financial executive who is effectively running as Mr. Bloomberg's heir...

We see arguments for ranking several candidates at the top of the ballot, including Mr. Lander for more progressive voters and Mr. Tilson for more moderate voters.

Additionally, I participated in the second and final televised mayoral debate on Thursday. (You can watch the full two-plus hours here and clips of all 12 minutes I was speaking here.)