Dear Mr. Berko: I’m a very senior citizen and have about 85 percent of my marbles.
I’m 86 and live in a nice adult congregate living facility.
I’ve been using a computer for nearly two years and am still learning.
And I also keep busy managing my $162,000 stock and bond portfolio. It forces me to keep abreast of the economy, politics, foreign affairs and many other factors that affect the stock market as well as the 20 issues I own.
I’m pleased to tell you that in 2009 I was up 8.2 percent and I’m ahead the same amount this year.
I have an account at Charles Schwab and don’t need a broker to tell me what to do. I read your column and subscribe to two services plus what I get online, which is all the information I need.
Now I need your advice.
In July of 2008 I bought 400 shares of Yahoo at $21.33 plus commission, and it has never been back there since. I’m not only disappointed in the stock’s performance, but I and several others I know are disappointed in the quality and performance of the Yahoo website, which we think may be an important reason that the stock has done poorly in the past 26 months.
I know earnings are improving, as are net profit margins. So my question to you is: Should I continue to hold Yahoo, sell it or buy another 400 shares?
Some of us here read your column and we are looking forward to your answer. – F.S., Chicago
Dear F.S.: An 8.2 percent return in 2009 and 2010 qualifies you to head the research department at JPMorgan, Goldman Sachs and Merrill Lynch and my IRA.
Yahoo’s revenues have basically been flat as a flapjack since 2006, but net profit margins have improved from 11.7 percent to 13.9 percent this year and perhaps to 15.4 percent in 2011, thanks to Carol “Big Mama” Bartz.
But that’s not an impressive feat. All Big Mama had to do was clean up after Jerry “Ying” Yang, the co-founder of Yahoo (YHOO, 52-week high of $19.12 as of April 15), who couldn’t manage a two-car funeral and has no bloody idea how to run a business that generates its earnings by selling advertising to corporate America.
Big Mamma is a brutish CEO who is not liked by Wall Street. She has no experience in running an Internet information provider or generating advertising revenues and is about as subtle as a train wreck. She’s confrontational with analysts, the media and key employees. And then there’s Yang, the blockhead who nixed the sale of YHOO to Microsoft at $31 per share in February of 2008. Mr. Ying Yang continues to be a thorn in the YHOO hide and knows less about generating advertising revenues than the premier of North Korea.
You are right about the YHOO experience. Its website is terribly slow to respond. Spam filters are useless. Sending an e-mail, pulling up e-mail (“wait while loading”) and other frustrating delays continue to annoy users. And content on Yahoo Finance (which is more important to you) is outdated, inaccurate and incomplete.
Some say the problem is YHOO’s engineers, who have to be watered twice a week to maintain minimum performance. (Did you know that a Yahoo is a race of brutish, degraded creatures?)
But YHOO has a classy balance sheet, only $85 million in debt, a book value of $10.87 and 14,000 employees, too many of whom are overpaid and underemployed.
Frankly, there’s not enough juice in the stock to warrant a purchase. But don’t sell those shares.
Because Big Mamma isn’t capable of doing her job, some vultures are circling this Internet company — two of whom are Silver Lake Partners and Blackstone Group — and they already have a CEO waiting in the wings. And there’re even rumors that Microsoft (MSFT, 52-week high of $31.58 as of April 23), with billions of dollars laying fallow in a bank account, needs a new gimmick to get investors interested in owning its shares again.
Please address your financial questions to Malcolm Berko, P.O. Box 8303, Largo, FL 33775 or e-mail him at email@example.com.