By Malcolm Berko
Dear Mr. Berko:
I own 77 shares of Goldman Sachs. Considering the current investigation, should I hold it, sell or buy more? And please tell me why. I also own 240 shares of Steel Dynamics. Please tell me if I should hold it, buy it or sell it, and please tell me why. I would really appreciate your answer as soon as possible. Thank you.
T.P., Kankakee, Ill.
Dear T.P.:
Goldman Sachs (GS – $146) will sell anything to anybody, anywhere, anytime. If someone designs a better Port-O-John, Goldman will package it as a private offering, perfume it, tell buyers that removal of the waste product is booked as a loss and therefore treated as a tax deduction. I knew Gus Levy when he was chairman of Goldman until he passed in 1976. And if Gus were alive today, he’d turn over in his grave if he had any inkling of what Goldman was doing.
But not to worry. The SEC investigation is just a speed bump as Goldman and other Wall Street Banks collude to establish their New World Order. Your 77 shares of Goldman Sachs are as safe as if they were insured by St. Pete himself. If you have any doubt, just ask Warren Buffett, who now owns $8 billion in Goldman stock.
The stock, which is down from $190, is still attractive, and first quarter’s earnings of $3.6 billion blew the doors off the hinges.
I suggest that you round out those 77 shares to an even 100. While I viscerally abhor Goldman’s “Greed is good” business model, I admit to a breathless admiration for Goldman’s raw power and awesome manipulation skills. Because GS has threatened to fire 37 congressmen, this impregnable company will emerge from an SEC hearing stronger than ever, and its Chairman, Mary Schapiro, will bow and kiss Chairman Lloyd Blankfein’s ring.
STEEL DYNAMICS (STLD – $15.55) is a $4 billion revenue, low-cost steel producer home ported in Fort Wayne, Ind. And while the global slowdown is affecting all steel makers’ near-term profits, STLD’s very flexible cost structure is proving to be an advantage in good markets as well as slow markets.
Unlike integrated steel mills that use iron ore and coking coal as raw inputs, STLD’s ultra-modern and lower-cost mini mills uses ferrous scrap that requires and 31 percent fewer employees per ton of flat-rolled steel than the competition. STLD is the lowest-cost flat-rolled steel producer in the U.S. STLD also makes “long products” such as beams, girders, bars and rails.
STLD’s efficiencies also make the company one of the lowest-cost producers in the world so it easily competes in the foreign markets. Meanwhile, STLD is 100 percent self-sufficient in ferrous scrap (which is environmentally friendly), which is an interesting hedge against worldwide competitors who have begun to build mini mills.
STLD is the largest scrap-metal recycler in the U.S. and probably even the world. This extremely well-managed company is also employee friendly, rewarding employee productivity with performance bonuses and stock options. The company’s founders own 7 percent of the stock; they don’t have platinum parachutes; its board members are independent and (unlike most public boards) they really contribute to STLD’s operations.
Standard & Poor’s, Morningstar, Bank of America, Wells Fargo and Credit Suisse have a positive outlook for the steel industry in the coming dozen months, indicating a 12.5 percent increase in steel consumption versus a 44 percent decline last year. Of course, this bodes well for STLD, so Standard & Poor’s and Key Bank have a “buy” recommendation on the stock with a median target price of $22. Hold STLD.
Please address your financial questions to Malcolm Berko, P.O. Box 8303, Largo, FL 33775 or e-mail him at mjberko@yahoo.com. Visit Creators Syndicate Web site at www.creators.com. © 2010 Creators Syndicate Inc.
