Just a Dollar Dear Mr. Berko: My broker is excitingly enthusiastic about Dollar Tree because of its pending merger with Family Dollar Stores. He thinks the shares could trade at more than $100 in two years. He wants me to sell my Boeing and Wal-Mart to buy 400 …Read more. Inflation and Interest Rates Dear Mr. Berko: In early March 2012, I asked you about a maturing $30,000 certificate of deposit in my individual retirement account. I was thinking about putting it in a 10-year Treasury bond yielding 3.125 percent. You said "absolutely not" …Read more. Bad Biotech and IT Recommendations Dear Mr. Berko: I have $10,000 to invest for a two- to three-year time frame and want to invest aggressively in a biotechnology issue and an information technology issue. Our Ameriprise broker has carefully researched and recommended three IT stocks …Read more. Planning Retirement Without Social Security Dear Mr. Berko: Several weeks ago, your email advice to our 32-year-old college-educated son about Social Security was distressing and frightening and went overboard with negativity. It illustrated your lack of faith in the American system. A member …Read more.more articles
Tesla and Kinder Morgan
Dear Mr. Berko: We are thinking about investing $18,000 and buying 300 shares of Tesla Motors and 100 Kinder Morgan for our joint account. Our objectives are capital gains and income, with a little more emphasis on capital gains. My wife and I would appreciate your opinion on these issues. BP: Destin, Fla.
Dear BP: Tesla Motors (TSLA-$34.45) makes a hot-looking car that runs on battery power. The biggest concern about TSLA's car, and all battery-powered cars, is that it may not get you where you want to go. That's also my concern about TSLA's common stock. Even though Tesla's Model S sedan earned rave reviews, great products often fail to make great investments. And a longtime acquaintance — I'll call him Bob — who is one of the fund managers of a very large mutual fund family, told me that he would personally short the stock. TSLA had a secondary offering at $28.75 last September and told investors that the company "is on track to deliver 20,000 Model S cars in 2013." Those cars sell for $80,000 plus state tax and Bob said he nearly fell off the floor when TSLA made that announcement. Toyota Motors, which may have the best R&D engineers and scientists in the auto industry, recently killed plans for an all-electric car. Toyota believes that battery technology is still in the 1940s, that technology necessary to meet consumer demand are least 10 years away, and that the costs are unacceptable. Tesla's Model S has the classy lines and looks of an expensive, sexy, Italian sports car. Realistically though, would American consumers want to own Maserati that has an electric lawn-mower engine under the hood?
Bob is also highly critical of the company's accounting. He believes the Deutsch Bank valuations are obviously unrealistic and doubts that TSLA can survive without constant cash injections or additional secondary offerings. I can't find a single, compelling reason to own the stock of a company that burns cash like fire wood, has lost nearly a billion dollars in the past 6 years and is selling cars for $80,000 (plus tax) to consumers who need to save money on gas.
Kinder Morgan (KMP-$80.20) is a pipeline transportation company with 37,000 miles of pipeline, enough to circle the globe once and half again. KMP's daily volume of 2.1 million barrels of oil and petroleum products plus 8.4 billion cubic feet of natural gas lights my Meerschaum. And KMP's 181 terminals that handle nearly 600 million barrels of oil a year also lights my bong. This $7.9 billion revenue company has grown its dividend every year from 45 cents in 1997 to $5.04 in 2012. Meanwhile KMP's recent $11.5 billion purchase of El Paso will add nearly $1.2 billion to revenues in 2013, enable KMP to increase its cash flow by about 10 percent annually and allow the board to grow its shareholder distributions by at least 8 percent a year.
KMP is run by Rich Kinder, who is considered to be one of the most brilliant and forward thinking CEO's in the pipeline business. The recent merger with El Paso makes KMP the largest natural gas pipeline company in the country, and the recent emergence of natural gas as an inexpensive fuel is a credit to Kinder's visionary instincts. And KMP's fantastic net profit margins of 26 percent are a testament to RK's genius as a manager. Revenues for 2013 are expected to come in at a record $9.3 billion and analysts believe KMP will pay $5.46 dividend, which at today's price yields 6.8 percent. The company has a strong balance sheet, comfortable interest coverage on $12.5 billion of long-term debt and only 365 million shares outstanding. This is a fine investment for capital gains potential, an equally fine choice for growing dividend income and could possibly become a split stock. Of course a large portion of the dividend, probably 90 percent, is not taxable.
Please address your financial questions to Malcolm Berko, P.O. Box 8303, Largo, FL 33775, or email him at firstname.lastname@example.org. 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.
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