Dear Mr. Berko: Please give our investment club your opinion on buying Western Alliance Bancorp. We may sell 350 shares of GM to buy it. Also, we’d like your thoughts on how the U.S. would serve its citizens better under a socialistic government.

J.H.

Oklahoma City

Dear J.H.: Holy Moses, Mary, Buddha and Allah, we already have a socialist government. Consider public housing, school lunches, child support, Medicare and Medicaid, food stamps, unemployment insurance, farm support, ad nauseam. The government is slowly increasing the means that give it greater control over how Americans run their lives. And many people in Congress believe government is moving too slowly toward socialism.

The nature of government is to control as many resources as possible, constantly expand and allocate those resources among its citizens who eventually become dependent upon federal and state programs. What a marvelous idea. By relieving ourselves of responsibilities, we’ll rely upon government guaranteeing our care, comfort and survival. Americans want that.

Once we’ve become institutionally dependent, socialism’s next objective is industry. This includes our country’s farms and factories, which become the property of the government, so the government controls the production and distribution of goods and private enterprise doesn’t. This seems to be the long-term goal of some members of Congress. And because of increasing voter stupidity, ignorance and laziness, this is closer to reality than ever before. The new term for this consequence is “democratic socialism,” which is obviously an oxymoron, but it could become a game changer.

Winston Churchill clearly described the difference between socialism and capitalism better than any I’ve read: “Socialism is the philosophy of failure, the creed of ignorance and the gospel of envy. … The inherent vice of capitalism is the unequal sharing of its blessings. While the inherent virtue of socialism is the equal sharing of miseries.”

However, capitalism has its miseries, because the unequal sharing of its blessings can be societally destructive and lead to creation of corporations like Enron, Global Crossing, Goldman Sachs, Wells Fargo, Arthur Andersen and AIG as well as people like the Keating Five. Because capitalism allows the wealthiest 1 percent of citizens to possess 95 percent of the nation’s wealth, these citizens can buy $500 million yachts, spend $125 million for a canvas at Christie’s or $135 million for a New York City penthouse. That leaves 5 percent of the wealth for the remaining 99 percent of us to spend. All systems are imperfect, though capitalism is the least imperfect.

I like Western Alliance (WAL-$43.43) – and so do Citigroup, Wells Fargo, Zacks, S&P, Reuters and BankAmerica – with a 52-week range of $37 to $64. It also has a 1.55 beta that suggests Western Alliance is 55 percent more volatile than the S&P 500. Western Alliance enjoys high net interest margins (4.8 percent) that are 100 basis points higher than the peer average, an 18 percent return on equity (50 points higher than its peer group) and a 25 percent higher return on assets than its peers. Revenues have grown fourfold in the past eight years to $959 million in 2018 and an expected $1.1 billion this year. Meanwhile, share earnings have increased annually from $0.21 in 2009 to an expected $4.20 this year.

Western Alliance’s service area is Arizona, California and Nevada, where management has been focusing its growth on commercial lending while opening numerous checking accounts that don’t pay interest. So, if interest rates move higher and Western Alliance increases the rates on loans, profits could increase faster than those of competitive banks because Western Alliance doesn’t have to pay more for deposits. Western Alliance has 18,000-plus loans on its books with nonperforming loans just 0.36 percent of assets. This Phoenix bank is run darn well, and the Street’s 12-month price objective is $55. Western Alliance pays no dividend, but I’d buy the stock in a Sioux City second.

Address your financial questions to Malcolm Berko, c/o The Daily Journal of Commerce, P.O. Box 8303, Largo, FL 33775, or email him at mjberko@yahoo.com. © 2019 Andrews McMeel Syndication

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Dear Mr. Berko: Half our investment club believes the market will crash this year and enter into a recession. We’re thinking of moving to 80 percent cash. Your thoughts, please.

Another question: We all did well in our work years, and it’s hard to believe how poorly our much-younger Americans are doing. Your comments?

T.N.

Oklahoma

Dear T.N.: There’s a righteous chart created by Ryan Detrick at LPL Financial that may warm the cockles of your heart. The chart reaches back to 1950. It shows that when the S&P is up more than 10 percent for the first three months of a new year (like this year), the market will close higher at year’s end – sometimes a lot higher. The only miss was in 1987.

The slow decline of the importance of the individual in the early 1960s and simultaneous rise in the prominence of groupthink has discouraged creativity and individual responsibility. This is painfully evident in the decay of many government agencies, such as Homeland Security, the VA, the Department of Education, FEMA, ad nauseum.

This collapse occurs within groups of people when their desire for conformity and harmony in the group results in irrational or dysfunctional decision-making outcomes. The most obvious examples of this failure are Congress, Medicaid and our public schools. And the public school system is the genesis of our future 20, 30 and 40 years hence. That scares the bejabbers out of me!

From the late 1940s to the early 1960s, the American dream of a home, a white picket fence, a Ford in the garage and dependable employment was vibrant and alive. Then, with the postwar baby boom (4 million babies were born each year during the “fabulous ’50s”) and classroom integration, our eminent public schools became sociopolitical battlegrounds, condemning tens of millions of Americans to dull mediocrity. And the denouement is a phenomenon called “the dumbing down of America.”

Several years ago, while teaching a class on capital formation, I asked a student how much he paid for his Chevrolet. He said it cost him $349 a month. I responded: “No, tell me how much you bought your car for.” He responded: “$349 a month.” We danced “ring around the rosy” twice again, and he finally said: “I have to make 15 more payments and I’m finished.” He was 32 years old, married, with three children and a B.S. in business administration. What a dummy. I feel sorry for his children, who may mature in ignorance.

At Thanksgiving last year, I made several purchases at a greengrocer. The total bill with state sales tax came to $10.71. I didn’t have a $10 bill and didn’t want a bunch of paper currency in my pocket, so I gave the cashier $21, expecting to get back a $10 bill plus 29 cents in coins. The cashier couldn’t understand the transaction and called the manager. Oh well!

Our infrastructure is crumbling, and there’s enough critical work with good pay to be done to eliminate unemployment for 30 years. The American Society of Civil Engineers (ASCE) says 15,500 of the country’s dams and 56,000 of our bridges are hazardous and deficient. It estimates the U.S. needs to spend between $4.5 trillion and $6 trillion to rebuild crumbling country roads, provide safe drinking water, modernize air traffic control systems and improve inland waterways. We must rebuild our decaying 60-year-old electrical transmission and power lines and find a way to store hazardous waste that’s edging too close to populated neighborhoods. There are 926 ports in the United States responsible for $5 trillion in economic activity that must be modernized. I can continue for pages.

If we can find skilled workers, they’ll earn excellent wages that will generate increased consumer spending, higher corporate profits and a strong stock market. Be an optimist, not a pessimist; you’ll get invited to more parties.

Address your financial questions to Malcolm Berko, c/o The Daily Journal of Commerce, P.O. Box 8303, Largo, FL 33775, or email him at mjberko@yahoo.com. © 2019 Andrews McMeel Syndication

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Dear Mr. Berko: I’ve invested off and on in about a dozen pot stocks and lost money each time. I’ve been looking at Aphria for three months and can’t make up my mind. What do you think?

H.L.

Wilmington, North Carolina

Dear H.L.: I don’t know enough about the cannabis industry to pick a winning pot stock from the many hundreds trading between pennies and a few dollars. These issues are pushed by bucket shop brokers whose commissions are 50 percent of what the stock sells for. Buyout and merger gossip is so capricious that many pot stocks trade up or down by 50 percent on any buyout rumor. In fact, there’s a rumor Boeing may take over a pot company and pass out product to passengers on its 737 MAX.

But Ian Gendler at Value Line thinks he has a handle on Aphria (APHA-$7.75), which began trading on the Big Board last year, just before Thanksgiving. Homeported in Canada, Aphria (via partners and distributors) cultivates, processes and distributes quality cannabis products to users in several countries. Its products are professionally and carefully cultivated in a high-tech, gleaming, 300,000-square-foot pot farm in Ontario. And unlike most penny pot stocks held together by flimsy business models and dog patch yokel CEOs in bib overalls, Aphria may be one of the top guns in this industry. Its officers and directors are serious businessmen, it elects a legitimate board of directors, and it uses a respected accounting firm.

This year, Aphria expects to put about $150 million of consistently high-class product on the market (many pot firms produce varying and undependable product quality), and should earn a clean dime a share or total net income of $25 million. That’s a 16 percent-plus net profit margin. Gendler reckons Aphria can increase revenues in 2020 to $555 million and report a profit of $0.30 per share or a total net profit of $90 million. And a billion dollars in revenues may be just a few years off.

According to the United Nations (an oxymoron), the global market for pot is currently $175 billion. There are over 200 million adults (over 21) using marijuana cultivated in 130 countries, and it is the most widely illicitly produced drug on the planet. In June 2018, the U.N. declared cannabis an effective and “relatively safe drug.” And in the coming years it’s hoped that most countries will legalize pot and then we can all get a bong.

I doubt Aphria is going to knock your socks off and run to $30 or $40 a share this year or next. Green Growth Brands (GGBXF-$3.50) made a short run at Aphria last year at $8.75 a share and was quickly turned down. Still, Aphria has a strong 2019 cash flow of $0.15 a share and possibly $0.35 in 2020. Book value of $6.25 this year could top $6.90 next year, while return on total equity and total capital could triple to 4.5 percent in 2020 from 1.5 percent last year.

Long-term debt in 2020 is expected to increase from $50 million to $60 million, which is about 3 percent of capitalization. However, management recently completed raising $300 million with a 5.25 percent convertible bond. Meanwhile, I’m surprised that Quaker Impact Growth Fund and Quaker Small/Mid Cap own 80,000 shares, and pleased to see that S&P rates Aphria a hold.

If you’re comfortable owning Aphria, then pull the trigger. The longer you sit on the pot, the more difficult it’ll be to make a decision. Either do it or don’t. The IPO price was $10 a share last November, and Aphria has since enjoyed a price range between $3.50 and $16.85. The only way to own this stock is as a long-term investor. I suspect in the next few years Aphria could be a $30 stock.

Address your financial questions to Malcolm Berko, c/o The Daily Journal of Commerce, P.O. Box 8303, Largo, FL 33775, or email him at mjberko@yahoo.com. © 2019 Andrews McMeel Syndication

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Dear Mr. Berko: I had bad luck last year buying various high-yielding issues you and my two top brokers recommended. The brokers lost over 70 percent and did embarrassingly worse than you. According to my wife, who’s my business partner and bookkeeper, I had a net return of minus 3.6 percent in 2018, including interest and dividends.

A friend of mine found a stock called Washington Prime that’s $5.50 a share and yields nearly 18 percent. I’d like to buy 5,000 shares and would appreciate your opinion.

E.Y.

Erie, Pennsylvania

Dear E.Y.: You must be a masochist, coming back to me for more punishment. Your folks must have dropped you on your head shortly after you were born, or they fed you too many Dum-Dums during your formative years.

Washington Prime Group (WPG-$4.50) is a wild-hair speculation that could singe your intestines and fry your occipital lobes. Initially, I thought you needed a psychiatrist, but after reviewing WPG, I think you need a discount broker. Your two top brokers will charge you some important body parts to purchase 5,000 WPG shares, while discount brokers like Vanguard or Schwab will charge $4.95 for the whole kit and kaboodle.

WPG is a mephitic, abominable and daft speculation, but because of its 17.7 percent dividend, could be an incredibly shrewd, crafty and ingenious speculation. While WPG has my imprimatur (if you can afford the risk), let it be known this is not a stock for widows and orphans or sons and daughters of widows and orphans. And – surprise, surprise – CFRA, the world’s largest institutional research firm, which acquired Standard & Poor’s Equity and Fund Research in 2016, agrees and has a buy rating on WPG. On the flip side, Charlie Schwab suggests WPG should be sold, believing it will strongly underperform the market in the coming 12 months.

This self-managed REIT operates and develops retail properties – 108 shopping centers consisting of 58 million square feet. These are primarily community shopping centers along the highways, byways and heavily trafficked thoroughfares in many major cities across our nation. Most of WPG’s community centers and malls are in Texas, Florida, Ohio, Illinois and Indiana.

WPG generates its revenue from leasing space to shoe stores, clothiers, restaurants, entertainment venues, department stores and the like. Investor sentiment for most things retail-related has been mind-numbingly negative. Nevertheless, I think WPG has made impressive progress in repositioning its portfolio, suggesting to me there’s a 60 percent to 70 percent degree of probability WPG can maintain its $1 dividend. However, the bears that are short, 22 percent of the stock, are betting on a dividend cut. I think the market has created a unique opportunity at a discount.

Most WPG malls have excellent locations and their real estate values remain strong. Be mindful that the malls we knew 20 or 30 years ago are not dying; rather they’re changing. WPG’s management has advanced a series of plans (tailored to specific communities in which it has malls and shopping centers) to redevelop vacant and soon-to-be-vacant big-box stores. And the new tenants will pay higher rents. It’s also important to know that WPG is capable of funding its plans at very favorable interest rates.

I’m told by two analysts whose knowledge of WPG is impressive that management is committed to maintaining the $1 annual dividend. And the strong balance sheet tells me WPG can afford it. Meanwhile, CEO Lou Conforti and two directors purchased over 200,000 shares last year at an average price of about $6.11. Last year WPG had revenues of $780 million and earned $0.42, but revenues will be about 7 percent lower this year, and share earnings may fall 5 percent.

If you can afford the risks, then do it! And $27,000 is a lot of risk.

Address your financial questions to Malcolm Berko, c/o The Daily Journal of Commerce, P.O. Box 8303, Largo, FL 33775, or email him at mjberko@yahoo.com. © 2019 Andrews McMeel Syndication

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Dear Mr. Berko: Your buy, sell or hold thoughts on B&G Foods and why. Do directors of public corporations earn their pay?

N.L.

Jonesboro, Arkansas

Dear N.L.: Cream of Wheat is one of my favorite morning foods, and so is McCann’s Irish Oatmeal when I toss a fistful of raisins into the bowl. B&G is a $1.6 billion company that makes, sells and distributes some 50 shelf-stable products, including frozen and canned vegetables, meats, beans, salsas, syrups, dressings and the like.

Thank you, B&G Foods (BGS-$22), for products by Polaner, Green Giant, SnackWell’s, Mrs. Dash, Accent, Durkee, LeSueur and myriad others that have earned a spot in our kitchen during the past 50 years of the company’s 120. And thanks to the wholesalers, supermarkets, mass merchants and warehouse clubs for bringing these products to us, including puffed corn, dry soups, rice snacks, nut clusters, hot sauces, maple syrups and delightful pizza crusts.

I like this company intensely, even though it missed consensus by 4 percent last quarter. I like its dividend, which has increased yearly from $0.55 in 2008 to $1.90 this year. And I like the 8.5 percent yield. I like the fact that B&G has increased earnings in 11 out of its last 13 years. There was a slight dip in revenues last year as B&G sold its Pirate Brands to Hershey for $420 million.

I like B&G because net profit margins, according to several investment services, continue to improve and are projected to exceed 10.5 percent in the coming few years. Morningstar thinks the trading price is a bit too high, S&P is neutral, and Credit Suisse rates B&G as underperform. On the other hand, Seeking Alpha, Zacks, Blackrock, Vanguard and Principal are significant shareholders, believing B&G will nicely increase its revenues for 2020 through 2023. In the past three months, insiders purchased 102,000 shares and sold 13,000 shares.

I think B&G is a fairly good long-term investment. Short-term price action may be wobbly and nothing to write home about. This mid-cap issue traded in the mid-$50s back in 2016 when the dividend was $1.73, revenues were $1.4 billion and net profit margin was 9.4 percent. Value Line’s Kenneth Nugent believes B&G can be a $70 stock by 2023-2024. B&G officers and directors agree: The president bought 44,000 shares, the executive vice president and chief operating officer bought 33,000 this year, and even the general counsel bought 10,000.

If you want to buy 300 shares as a long-term investment, I’ll put my imprimatur on it. B&G could be a slow winner, and while you’re waiting a few years for potential capital gains, you’ll be pleased as a pasha with a nice quarterly dividend that should be reinvested. Despite the drop in value to $21 in the past year, many observers believe that in the coming two to three years B&G will make a positive contribution to your total wealth.

Being a director of a group of mutual funds or a public corporation is a sinecure that usually is handed out to lucky old dodos and friends in the industry as a reward for service. They’re paid exceptionally well – often $200,000 annually (per board position) plus perks, travel costs and per diems while attending meetings. Many of these old guys are on six to 10 boards and never worry about earning a living for the remainder of their lives.

Most directors are useless window dressing. Did the boards of GE, JCPenney, Macy’s, Theranos, Sears and many others keep their companies solvent? I wouldn’t waste a vote on those coiffed meatheads wearing $3,000 suits.

Address your financial questions to Malcolm Berko, c/o The Daily Journal of Commerce, P.O. Box 8303, Largo, FL 33775, or email him at mjberko@yahoo.com. © 2019 Andrews McMeel Syndication

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Dear Mr. Berko: If you think it’s a good idea, we’d like to invest $25,000 each in three regional banks for our self-managed retirement account. During the last 14 years we earned an average annual return of 8.2 percent. I think continued improvement in the economy warrants this purchase. We’ve selected PNC, and I would like you to recommend two more.

We also have a modestly successful architectural practice. The high taxes here are killing us. We’re vacationing to Florida and thinking seriously about moving there. I’ve been offered an equity position with a firm in your area and was hoping you might know of them.

C.P.

San Diego

Dear C.P.: Wow! That 8.2 percent is an impressive 14-year record.

The problem with most folks retiring to Florida from high-tax states is, when you vote as Floridians, you vote for the same politicians who raised your taxes in California, New Jersey, Illinois, etc. Stay there. There are so many of you here that vehicular traffic becomes assaultive, restaurant prices increase 20 percent, and wait times at retailers, theaters and even physician’s offices become intolerable. Your record numbers diminish our quality of life. Florida has 386 people per square mile. And many of us who are longtime Florida residents prefer you stay home. Or move to Texas, which has 98 residents per square mile and no income tax.

I recognize the name of the firm that you may join. It has a good reputation with clients in various cities and has been in business for longer than I can remember. An architect I know in Tampa tells me it’s a high-class firm with “exceptionally good political connections.” That’s important. Your visit to the Florida office will tell you if the job-fit warrants leaving the Left Coast.

There seems to be unusual optimism for the regional banks. The three most prominent reasons are:

1. Tax reform: Now that the new statutory rate has been lowered to 21 percent, the increased earnings potential will improve capital generation, encourage stock buybacks and grow dividends.
2. A strong economy: The GDP is growing nicely, unemployment is lower and higher wages plus benefits from tax reform have increased consumer confidence. Consequently, banks benefit from consumer spending and higher loan growth.
3. Changes in regulation: Under the Obama administration, banks fought a restrictive regulatory landscape. Regional banks were forced to hold enormous amounts of excessive capital. Excess capital can be leveraged or returned to shareholders, giving management more flexibility.

PNC Financial Services (PNC-$133), a $40 billion Pittsburgh bank, yields 3.1 percent and is a bank I’d care to own. Its 2,500 branches, 10,000 ATMs and 53,000 employees in the Midwest produced record revenue, earnings and dividend growth, a comfortable P/E plus a swell 1.38 percent net profit margin. This is a grand bank, though I’m dismayed by enormous insider selling of tens of thousands of shares this year.

I’d recommend Keycorp (KEY-$16.95), a $14 billion bank from Cleveland, with a generous 3.9 percent yield and a fine 10-year record of revenue, earnings and dividend growth. Trend Spotter and Sander O’Neill have positive recommendations, while Value Line believes Keycorp could trade in the middle $30s by 2023. And you’d be earning a good dividend while waiting for that to happen.

Finally, I like Huntington Bancshares (HBAN-$13.45), an $11 billion bank homeported in Columbus, Ohio, and founded in 1866. Huntington Bancshares owns a fine 1.41 percent net profit margin, thanks to good management, and pays a generous 4 percent dividend that’s been raised in each of the last nine years – and may be raised repeatedly in the future, because revenues and earnings should continue to improve. The Street suggests that 1,000 branches and 16,000 employees could help the company’s stock trade in the $20s during the coming four years with nice dividends along the way.

Address your financial questions to Malcolm Berko, c/o The Daily Journal of Commerce, P.O. Box 8303, Largo, FL 33775, or email him at mjberko@yahoo.com. © 2019 Andrews McMeel Syndication

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Dear Mr. Berko: I’m close to retirement and my $400,000 IRA didn’t do well under my previous broker. Over the last 11 years, it’s averaged 7.23 percent. I asked him to be more aggressive, and it’s just not his style. So I moved to another firm, using a broker I’ve known for 20 years who told me he’s had good results with blank check companies or special purpose acquisition companies. He wants me to invest 25 percent of my IRA in them so he can “cherry pick” the issues. My wife is against it, but I’m convinced this broker’s smart, and in the past six years, he says, he has earned a 16.7 percent return. What do you think?

Also, last December I bought 300 shares of Elanco Animal Health at $30.50, and in a strong market it’s only $32. I’m thinking of selling, but my wife says we should buy 300 more shares. Your advice would be appreciated.

L.B.

Cleveland

Dear L.B.: Your wife’s a smart lady and certainly smarter than you. I don’t believe the story about a 16.7 percent return. This “brokster” sounds like the type of guy who breaks into funeral homes at night to collect body parts. Listen to your lady, Larry!

There are very fine investments, and there are many OK investments. There are also very bad investments, and there are investments that are absurd, stupid and brainless. They’re called blank check companies or special purpose acquisition companies (SPACs), and I wouldn’t go near one with a sound wave. They were popular before the financial crisis, and the concept is now enjoying a successful comeback.

These dreadfully speculative investments are sold only to slow-witted, dippy investors who are still riding turnip trucks. Because SPACs are enjoying enormous popularity, they’ve raised $16 billion in new money since 2010, thanks to sundry odious broksters who’d steal pennies off their dead mother’s eyes. On average, SPAC IPOs raised about $254 million each, held in escrow ’til a deal is done. These companies have neither assets nor operating history and are basically blind bets (therefore, “blank check”) based upon a management team’s ability to use the escrow funds to make profitable deals.

It’s customary for SPACs to price their IPOs at $10 a share, which is convertible into the target company’s shares, usually on a share-for-share basis. If the funds are not spent within a year, the shareholder can request his money back. In some instances, the shareholder can request a refund if he doesn’t like the targeted company.

Most SPACs have underperformed the market for years, and many still trade below $10. There are 110 SPACs trading on NASDAQ and seven on the NYSE; however, most investors are not happy campers, because 70 percent of them trade below their IPO price.

Elanco Animal Health (ELAN-$31), spun off by Lilly in September 2018, provides products for companion and food animals. It’s the fourth-largest animal health care company in the world. Elanco management believes 2019 will produce revenues of $3.2 billion and earn $1.10 a share. And if management gets its ducklings in order, 2020 could record $3.4 billion with earnings of $1.30 a share.

Elanco sells parasiticidal products, pain therapies, vaccines, enzymes and antibiotics as well as a range of food products and arthritis, heart and dermatology applications. Excellent management tripled revenues in the past nine years. Elanco has a big pipeline, with 36 new products to be launched by 2022.

Argus has a good report on Elanco, believing management can produce a five-year earnings growth rate of 12 percent! Some observers think that’s too conservative because most Americans would forgo a new tattoo to pay a vet’s bill. Argus has a $37 target this year, suggesting a 17 percent growth rate from the current price. The shares haven’t performed well since the spin-off, but some growing pains are expected for a stand-alone company.

Address your financial questions to Malcolm Berko, c/o The Daily Journal of Commerce, P.O. Box 8303, Largo, FL 33775, or email him at mjberko@yahoo.com. © 2019 Andrews McMeel Syndication

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Dear Mr. Berko: I know the Australian economy because, before my divorce, we lived there for 14 years. I made a good living and managed to save over $135,000 American. I was in the booming construction business, and in my last five years, I was foreman of a 23-man crew. The money was fantastic.

I can’t find work here that pays as much as in Australia and may return there. I know nothing about the Australian stock market, but I would like to invest about $20,000 each in three Australian stocks as long-term investments.

E.O.

Portland

Dear E.O.: Other than Antarctica, Australia, with 26 million people, is the driest continent on the planet. Australia has the longest fence (a dingo fence) in the world; it extends nearly 3,500 miles. Australia is the only country with three national Frisbee teams. Meanwhile, 67 percent of Australians are overweight and they love Vegemite. However, 75 percent of American men and 60 percent of American women are obese or overweight and don’t eat Vegemite!

Australia has a very active stock market with 2,300 listings and an Australian dollar value greater than $2.2 trillion. The Australian S&P/ASX 200 Index, which currently trades at 6,160 points, imploded to a record low during the world financial crisis in November 2007.

The S&P/ASX group was created by the merger of the Australian Stock Exchange with the Sydney Futures Exchange in 2006. It’s now the world’s 10th-largest exchange by capitalization. The exchange came public in 2007 with the symbol ASXFY and trades at $53 in U.S. currency. The ASXFY had $1.1 billion in revenues last year, earning $445 million or $2.30 a share.

I know very little about the Aussie exchange or Aussie stocks, so I called an old acquaintance, Dickie Quartermain, whom I first met 40 years ago when he was admitted to the ICU in a hospital in Kathmandu, Nepal. Dickie used to train kangaroos to swim under water and wrestle crocodiles. But after leaving the ICU with one hand, he decided to join his father’s brokerage business.

I asked Dickie, now a retired, wealthy trader who winters in Burpengary, for three classy stocks that could be winners. He demanded from me a tin of Tim Horton’s coffee for each name. The names he gave are: Westpac Banking Corp. (WBC.AX-$27), Dicker Data Ltd. (DDR.AX-$4.33) and Wesfarmers Ltd. (WFAFY-$12.54). (Values given are American dollars.)

Westpac, a $21 billion revenue bank, has excellent operating momentum from core retail and business banking franchises with impressive cost/income performances. Solid economic conditions underpin consistent growth with a low-risk domestic business model. Advantages include: growing economies of scale, dominant market conditions and a superior balance sheet. Pricing power and high credit ratings provide strong platforms that drive growth. And Westpac’s balance sheet is wisely built around consumer banking with earning diversity that complements volatile returns from business and wholesale banking activities. Westpac has a two-year price objective at $36. The dividend yielding 7.3 percent should increase yearly.

Dicker Data is a $1.5 billion wholesaler-distributor of computer data and related products. It offers products from vendors like Microsoft, Hewlett Packard, Cisco, Toshiba and Lenovo and services over 5,000 resellers. The 20-cent dividend yields 4.9 percent. Revenues for 2019 could come in at $1.7 billion, earnings could double to $0.40 and Dicker could run to $8.

Wesfarmers, a $67 million revenue conglomerate, operates retail businesses, coal and mining production, safety product distribution, chemicals and fertilizer production and investment businesses in Australia and New Zealand. Wesfarmers owns 900 liquor stores, 810 Coles supermarkets, 88 hotels and 711 convenience stores. It also offers home and car insurance and much more. Revenues were down significantly last year, though they should recover nicely in 2019. The $0.71 dividend yields 5.75 percent and may remain unchanged this year while Wesfarmers tries to move its stock price to the mid-teens early in 2020. Did you know that kangaroos can’t walk backward?

Address your financial questions to Malcolm Berko, c/o The Daily Journal of Commerce, P.O. Box 8303, Largo, FL 33775, or email him at mjberko@yahoo.com. © 2019 Andrews McMeel Syndication

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Dear readers: The following are short answers to some frequently asked questions.

Socialism vs. capitalism in the U.S.

Many politicians are taking “Santa Claus” classes at night school, resulting in a growing molehill of congresspeople who are slowly morphing into socialists with proposals for free education, free health care and a universal basic monthly income. And a buzzing hive of congresspeople are proposing to eliminate student debt for families earning less than $100,000. Good arguments can be made for and against these giveaways, but I’ll not be drawn into them.

And many politicians, persuasive enough to get the devil to sing in a Baptist choir, can, in 10 minutes, convince you socialism – government control of income, production, banking and distribution – can effortlessly solve most of the problems created by capitalism. Nor will I be drawn into this debate.

However, be mindful that while we can vote our way into socialism, we’d probably have to shoot our way out. If that’s what the majority of Americans want, then I must accept it or move to Iceland, which has been a real constitutional republic since 1944. Frankly, there are millions of Americans who would be happy as hogs on ice living and working under socialism.

“Poetry, Ponderings, Musings”

Thanks, dear readers, for your enthusiastic response to my book. But please understand I make only $2.06 for each book purchased on Amazon. During the past three weeks I’ve personally autographed and returned 87 of those books, and it cost me $348 in postage plus $0.75 per envelope. So, beginning May 21 (one month before the summer solstice), I won’t return a book unless it includes a stamped, self-addressed envelope. And that also includes the weekly letters I receive without return postage or an email address.

Speaking engagements

Almost twice a month for 30 years I’ve flown from coast to coast speaking to audiences in cities where this column is published. I even bought a small Cessna for 300-plus-mile hops. My subjects were identical to those in this column: the stock market, how to select stocks and stockbrokers, the evils of Wall Street, the banking industry and annuity pushers – 50 years of my stock market philosophy and humor. I’m cutting my speaking appearances from 18 a year to once a quarter because my wife threatened to join me on all public appearances exceeding four.

The right prescription for Rite Aid

Rite Aid (RAD-$9.62), with shares recently trading below a buck, received a notice of noncompliance from the New York Stock Exchange and effected a one-share-for-20 reverse split in March. So 32,000 shares bought at $0.77 last year for $24,600 are now 3,200 shares at $9.62, worth $30,800 and a $6,200 profit. But the gain may disappear, because new management told investors Rite Aid may earn between a penny and 4 cents a share this year. Fortunately, the CEO, the financial chief and the operating chief are leaving the company as part of a restructuring plan that also eliminates 400 full-time management positions.

Even after Walgreens purchased about 2,000 of Rite Aid’s stores in March 2018, Rite Aid remains the nation’s third largest drugstore with 2,500 units. If it’s not possible for the DNA of one company to be genetically inferior to the DNA of another, then I don’t know what’s wrong with Rite Aid, whose profitless years since 2005 greatly exceed its profitable years. An alternative reason for such pathetic results is that previous management was hired by the shorts to run Rite Aid into bankruptcy. However, this $22 billion revenue company has a $15.20 book value, and if Rite Aid declared bankruptcy, you’d have about a $6.20 gain per share – or over $24,000.

Some folks believe the best alternative for Rite Aid is a white knight, but that white knight might end up black and blue. Competitive headwinds are getting stiffer, recovery prospects are bleak, and Rite Aid is well behind its rivals in nearly every metric. But don’t sell yet; I need to talk to several more Rite Aid people.

Address your financial questions to Malcolm Berko, c/o The Daily Journal of Commerce, P.O. Box 8303, Largo, FL 33775, or email him at mjberko@yahoo.com. © 2019 Andrews McMeel Syndication

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Dear Mr. Berko: Is Vodafone, at $19.25, paying $1.70 and yielding 8.8 percent, a good buy? The stock is trading down from $30 last year. I like the income and can afford 1,000 shares.

What about Endo International, a drug company that in 2013 and 2014 traded in the high $90s? I bought 600 shares at $16 in 2008, selling them two years later at $35. Later I bought 400 shares at $26, selling them a year later at $49. Are 3,000 shares of Endo at $10 a good speculation to $30?

K.J.

Vancouver, Washington

Dear K.J.: Vodafone (VOD), now $18, is a huge, international mobile telecommunications company with 256 billion shares outstanding, 550 million mobile customers in 25 countries and a home office in England, where King Arthur and Merlin once ruled.

Vodafone’s former CEO, Vittorio Colao, who has the people skills of a cobra, stepped down last year after 10 years and the stock trading at $30. However, when Colao assumed the reins at Vodafone in 2008, the shares were trading at $40. In all fairness, between 2011 and 2013, Vodafone traded between $60 and $72, and net profit margins ranged from 19 percent to 22 percent. During the following five years, Vodafone imploded.

Revenues, which were $74 billion, collapsed to $51 billion last year. Earnings topping $8 a share six years ago crumpled to $0.85 in 2018. The dividend, once $8.15 a share, was pulverized to $2.67, and the all-important net profit margins, once 19 percent, plummeted to 4.4 percent. What a bleeding mess.

Colao was baffled as he and his inept toadies watched Vodafone rot and its metrics disconnect. Last year Colao didn’t even blink when Vodafone recorded its lowest revenue volume in 15 years. Vodafone became Peck’s bad boy on Wall Street and Fleet Street, and the board finally told Colao to take a long walk off a high alp. Nick Read, who has been with Vodafone and held numerous positions since 2001 and has solid credentials, was promoted from CFO to CEO last December.

The only reason Vodafone shares crashed was stinky, wretched, abominable and beastly decision-making by Colao and his chums, some of whom, I hope, walked off that alp with Colao. Today, many on the Street (Merrill Lynch, Citigroup, UBS, Reuters, Argus, S&P, Oppenheimer, Morgan Stanley and JP Morgan) have solid buy recommendations for Vodafone. Even Value Line believes the “long-term capital gains potential is ‘much’ above the Value Line median,” and reckons Vodafone could trade at $55 anytime between 2021 and 2025.

During the coming five years, analysts who follow Vodafone expect its earnings to grow at an average annual rate of 7.15 percent to 7.75 percent. This year, earnings should come in at $1.33 to $1.39 and could run to the $2.10 level by 2022. And the exceptional dividend of $1.70 at Vodafone’s current trading price yields 9.1 percent. Please be mindful that Vodafone’s significant cash flow allowed its inutile board of directors – there’s a lot of rot there that must be addressed soon – to pay dividends in excess of earnings.

Endo International (ENDP), now $7.75, came public in 2000 with an IPO managed by “Smith Baloney” and Bear Stearns and was among the darlings of Wall Street as revenues and earnings set glorious records in 2014 and 2015. Endo International’s most profitable offering is Opana ER, an opioid painkiller that I thought was a toothpaste! But Opana became a lovefest among Hollywood celebrities.

I wouldn’t touch Endo International with a fire hose. It’s being sued across the Seven Seas in high-profile cases for contributing to the opioid epidemic. Many Americans take opioids for thrills. When they “overthrill,” they hire lawyers to sue the product makers rather than take personal responsibility. Because Endo International is so small ($1.8 billion), the courts could award damages, and a conviction would bankrupt the company. Investing is a good idea, but bad timing.

Address your financial questions to Malcolm Berko, c/o The Daily Journal of Commerce, P.O. Box 8303, Largo, FL 33775, or email him at mjberko@yahoo.com. © 2019 Andrews McMeel Syndication

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