ETFs to Make the Most of Oracle-Cerner Deal
In a bid to expand its position in the healthcare space, software giant Oracle (ORCL) agreed to buy electronic medical records company Cerner Corp. (CERN) for $28.3 billion.
Following the news, shares of ORCL dropped 5.1% on the day. The stock crushed its average volume as 16.9 million shares moved hands compared with 9.7 million, on average. Meanwhile, shares of CERN added 0.8%.
This put the spotlight on some ETFs, which could be the best ways for investors to tap the opportunity arising from the proposed Oracle-Cerner deal. Investors should keep a close eye on the movement of these ETFs — iShares Expanded Tech-Software Sector ETF IGV, Invesco BuyBack Achievers ETF PKW, Invesco Dynamic Software ETF PSJ, First Trust NASDAQ Technology Dividend Index Fund TDIV and First Trust Cloud Computing ETF SKYY — over the coming weeks.
Deal in Focus
Per the terms of the deal, Cerner shareholders will receive $95 in cash for each share they hold, representing a premium of 5.8% to the company's closing price as of Dec 17. The transaction represents Oracle's biggest ever deal after its acquisition of PeopleSoft in 2004.
As Oracle is struggling to gain ground in the cloud-computing business and is far behind market leaders such as Amazon.com AMZN and Microsoft Corp MSFT, the acquisition would give a huge foothold in the health industry. The deal will help the software maker to bolster the services it provides to healthcare clients, including insurers.
The acquisition, expected to close in 2022, will be 'immediately' accretive to Oracle’s earnings, with a “substantial” contribution expected in the second fiscal year after the deal closes. It would also add to revenue growth as the deal will expand Cerner's business into more countries. After completion of the deal, Cerner will be organized as a dedicated industry business unit within Oracle.
Oracle surged to a new peak last week, following the stellar fiscal second-quarter 2022 results. The company beat the Zacks Consensus Estimate for both earnings and revenues on a rebound in IT spending. It also offered solid revenue guidance for the ongoing quarter. Oracle carries a Zacks Rank #3 (Hold) and has a Growth Score of A. It belongs to a bottom-ranked Zacks Industry (top 44%) (read: ETFs to Buy on Oracle's Solid Q2 Earnings).
ETFs in Focus
Let’s delve into each ETF below:
iShares Expanded Tech-Software Sector ETF (IGV)
iShares Expanded Tech-Software Sector ETF provides exposure to software companies in the technology and communication services sectors by tracking the S&P North American Expanded Technology Software Index. The fund holds a basket of 129 securities with Oracle taking the fifth spot at 6.2% of the total assets.
iShares Expanded Tech-Software Sector ETF is popular with AUM of $5.9 billion. Volume is good as it exchanges 1.4 million shares a day. The product charges 43 bps in annual fees and has a Zacks ETF Rank #2 (Buy) with a High risk outlook.
Invesco BuyBack Achievers ETF (PKW)
Invesco BuyBack Achievers ETF follows the NASDAQ US BuyBack Achievers Index, which comprises U.S. securities issued by corporations that have led to a net reduction in shares outstanding of 5% or more in the trailing 12 months. It holds a basket of 103 stocks with Oracle taking the third position at 5.4% allocation.
Invesco BuyBack Achievers ETF has accumulated $1.5 billion in its asset base and trades in an average daily volume of 196,000 shares. It charges 64 bps in annual fees.
Invesco Dynamic Software ETF (PSJ)
Invesco Dynamic Software ETF offers exposure to the companies that are principally engaged in the research, design, production or distribution of products or processes that relate to software applications and systems and information-based services. It follows the Dynamic Software Intellidex Index, holding 31 securities in its basket. Out of these, Oracle is the second firm accounting for 5.4% share (read: What "Bubble Asset"? Tech ETFs Likely to Gain on Omicron Fear).
Invesco Dynamic Software ETF has amassed $381.5 million in its asset base and trades in an average daily volume of about 13,000 shares. The expense ratio came in at 0.56%. PSJ has a Zacks ETF Rank #3 (Hold) with a High risk outlook.
First Trust NASDAQ Technology Dividend Index Fund (TDIV)
First Trust NASDAQ Technology Dividend Index Fund provides exposure to the dividend payers in the technology sector by tracking the Nasdaq Technology Dividend Index. It holds about 93 securities in its basket. Of these firms, ORCL occupies the sixth position, making up 4.1% of the assets
First Trust NASDAQ Technology Dividend Index Fund has amassed about $1.8 billion in its asset base and trades in a moderate volume of about 45,000 shares per day. The ETF charges 50 bps in annual fees.
First Trust Cloud Computing ETF (SKYY)
First Trust Cloud Computing ETF provides exposure to companies involved in the cloud computing industry by tracking the ISE CTA Cloud Computing Index. Holding about 67 stocks in the basket, Oracle takes the second position at 3.8% (read: ETF Areas Making Good Bets Amid Rising Omicron Threats).
First Trust Cloud Computing ETF has been able to manage $6.5 billion in its asset base while seeing a good volume of about 321,000 shares a day. Its expense ratio is 0.60% and it has a Zacks ETF Rank #2 with a Medium risk outlook.
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Amazon.com, Inc. (AMZN) : Free Stock Analysis Report
Microsoft Corporation (MSFT) : Free Stock Analysis Report
Invesco BuyBack Achievers ETF (PKW): ETF Research Reports
First Trust NASDAQ Technology Dividend ETF (TDIV): ETF Research Reports
First Trust Cloud Computing ETF (SKYY): ETF Research Reports
iShares Expanded TechSoftware Sector ETF (IGV): ETF Research Reports
Invesco Dynamic Software ETF (PSJ): ETF Research Reports
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