Apollo and Yahoo by Malcolm Berko on Creators.com

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Apollo and Yahoo

Dear Mr. Berko: Your opinion would be appreciated on buying 1,000 shares of Apollo Investment as a two- to three-year hold. And your opinion would also be appreciated on buying 1,000 shares of Yahoo for a short-term six-month to nine-month hold. And by the way, can you tell me what symbols to use when pricing preferred stocks on Yahoo? You recommended a dozen bank preferreds over a year ago. I bought eight of them and they are all up at least 50 percent and I get over 12 percent income. But I don't know the Yahoo symbol and can't follow their prices. — C.H., Wilmington, N.C.

Dear C.H.: Apollo Investment (AINV — $9.50) looks like a fair-to-good bet for a stock with an uncommonly high $1.12 dividend yielding 11.6 percent. Apollo is a specialty finance company that invests in middle-market businesses with revenues between $100 million and $2 billion, and may provide mezzanine financing as well as secured loans. The Apollo boys do a pretty fine job of choosing the 74 companies in their investment portfolio. While Wachovia, Merrill and Value Line suggest that AINV may not be an attractive equity for the next few years, Reuters, Argus and RBC rate Apollo as "outperform." And I agree with the latter because competition is declining while banks and large commercial lenders are focusing on existing investments and trying to exit riskier markets.

This bodes well for AINV, which will soon raise additional capital (stock offering) because management believes there's a lot of good quality businesses that myopic banks can't see. The company expects to report 2009 earnings of $1.32 and post earnings of about $1.49 for 2010. So the 2009 dividend of $1.08 and the potential $1.12 dividend for 2010 are well covered. I think the stock could move to $15 in the coming 12 months and would be comfortable owning 1,000 shares as a speculative income investment.

Many banks are afraid of their shadows and subsequently lack the foresight to recognize a good investment/loan.

AINV, according to Argus Research, has excellent management, who should be able to cherry pick some of the best new investments for its portfolio.

Yahoo (YHOO — $17.76) doesn't butter my bagel, toast my bread or open my door. In fact, Yahoo gives me the cold fuzzies, makes my teeth itch and my tongue numb. And no, I can't give you the YHOO preferred stock symbol sequence because I don't know it.

I called Yahoo, and some idiot answers the phone with an ear-piercing rebel yell, screaming, "YAAAAHHOOOOO!" That darn shriek nearly shorted my pacemaker and shattered two of my crystal wine glasses. I did speak to several Yahoo dudes, who sounded dumber than a flock of Arctic woodpeckers, but they didn't know "chirp..."

So I wrote CEO Carol "Top Gun" Bartz and President Susan "Little Suzy" Decker and nicely asked each how to configure Yahoo's preferred stock symbols. Either they have ADD or MSG or are too busy playing mahjong with Jerry Yang, the ex-CEO whose ego wouldn't let him sell Yahoo to Microsoft at $31 in mid-2008.

I don't care for this company because: (1) Management is unable to deliver its new advertising platform; it's just delay after delay after delay. (2) Management fails to recognize that Facebook, YouTube, MySpace and other trendy sites are sucking away YHOO users. (3) Management underestimates the stiff competition from AOL, Google, TWX and MSN, whose advertising platforms are eating Yahoo's lunch. (4) A good portion of Yahoo's revenue derives from a search that has almost zero switching costs. Unfortunately, management has allowed Yahoo to fall light years behind Google in technology. (5) Yahoo Finance, once a popular site for stock market data, is full of hiccups, untimely and incorrect information, and seems to be managed by Keystone Kops who think blue chips are colored nachos. And finally (6) Carol and Suzy's management skills really "sphinx."

Please address your financial questions to Malcolm Berko, P.O. Box 8303, Largo, FL 33775 or e-mail 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.