Dear Mr. Berko:
I have been watching Amazon.com Inc. for almost a year and have seen its stock price drop from over $408 last year all the way down to $290, but now it's back over $300. Do you think the stock could move back to $400, and if so, would you recommend 50 shares of Amazon as a good short-term speculation? And could you please tell me about American First Multifamily Investors, which pays a 9.7 percent tax-free yield? I'd like to buy 3,000 shares.
- GK, Port Charlotte, Fla.
Dear GK:
I think Amazon.com could trade back at the $400 level in the next six months because there are enough fools and dreamers out there to move it up again. If it runs back to $400, the reason won't be potential earnings of $2; frankly, there's no investment in the galaxy worth a price-earnings ratio of 200-to-1. If it returns to $400, it will only be because Dr. Pangloss and his legion of loonies who worship the Wizard of Oz, the Great Pumpkin and the Jolly Green Giant will have made it so.
Amazon.com (AMZN-$309) is an $89 billion-revenue company that will report a loss again in 2014. And this year, revenues may rise to $96 billion. Wall Street believes that Amazon's earnings will range between a profit of $2.30 a share and a loss of $1 a share. This wide earnings range is an indication of AMZN's uncertain earnings prospects and casts doubts on CEO Jeff Bezos' management expertise.
At the beginning of last year, when AMZN was trading at $400, I advised a reader not to buy the stock, suggesting that AMZN was priced for stupids, not investors. And today, some 90 points lower, AMZN is still priced for stupids. I can't imagine paying $300 for a stock that had no earnings last year and may lose big money this year. Bezos must have similar thoughts, as records show him selling 1 million shares in February 2014 at $357 and pocketing over $360 million. In all fairness, JB still owns 84 million shares; perhaps he just needed some walking-around money. But all of us are thankful for the federal taxes he paid (we hope) on the gain. Some observers suggest that JB may purchase another newspaper (he recently bought The Washington Post), and I've heard talk from two sources that JB is in the market to buy a professional football or baseball team and an airline, too. Meanwhile, what do you think could happen to AMZN's stock price if management reported unexpectedly higher operating expenses on its various business sectors as it did earlier in 2014? I don't think the reward justifies the risk, but if you have idle money that's growing restless, try a buy of 50 shares. There are still stupids who might buy AMZN from you at a higher price.
American First Multifamily Investors (ATAX-$5.29), which came public at $20 in 1998, is followed by only one brokerage. Oppenheimer came out with a buy recommendation in February 2014, when it traded at $6. And the Oppenheimer lads still recommend its purchase. No one else on the Street follows ATAX, though Deutsche Bank, early last year, acquired a block of ATAX for its own account. The current 12.5-cent quarterly dividend has been steady since 2010, yields 9.7 percent and is tax-free. Yep, tax-free. Oppenheimer and Deutsche Bank took ATAX public at $20 in 1998 to acquire, hold and trade a portfolio of federally tax-exempt revenue mortgage bonds. These bonds were issued to provide construction and permanent financing for 32 Section 8 multifamily residential properties. ATAX owns a portfolio of 42 revenue mortgage bonds, issued by states and local housing authorities for the construction of over 5,100 living units. The 32 facilities are located in California, Florida, Illinois, Indiana, Iowa, Kansas, Kentucky, both Carolinas, Ohio, Tennessee and Texas. ATAX has 60 million shares, revenues of $34 million, net profits of $13 million and a book value of $5.10, and it has paid a 50-cent dividend since 2009. I prefer a 3,000-share purchase of ATAX to a 50-share purchase of AMZN.
Please address your financial questions to Malcolm Berko, P.O. Box 8303, Largo, FL 33775, or email him at mjberko@yahoo.com. To find out more about Malcolm Berko and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate website at www.creators.com.
© 2015 Creators.com
Published: Tue, Jan 13, 2015
