Dear Mr. Berko: I just got a $30,000 bonus from my employer and, believe me, I deserve three times that much considering the money I made for him.
I want to speculate with that money, and my broker has recommended that I buy 300 Home Depot, 200 JPMorgan and 4,000 Phoenix Cos.
Another broker with whom I bowl has advised me to put half the money in the Fairholme fund and trade commodities (copper, aluminum, wheat, etc.) with the remaining half.
Which would you recommend that I do? – H.S., Jonesboro, Ark.
Dear H.S.: I certainly wouldn’t buy JPMorgan, which, in my opinion, is among one of the most un-American American companies in America. And I certainly wouldn’t trade commodities, which for plebes like you is a little less risky than skydiving without a parachute.
JPMorgan (JPM, $44.88) probably owns 90 percent of the existing copper positions on the London Metal Exchange, which is the reason copper is trading at record prices.
JPM, whom Americans bailed out with $25 billion in Troubled Asset Relief Program funds, is evil incarnate and makes about 65 percent of its income from trading currencies and commodities like aluminum, zinc, oil, wheat, gold, etc. And so they stick it to the consumer with higher prices for food, tubing, fertilizer, gasoline, wire, airfares, building supplies, etc.
JPMorgan is not a bank. It is a “bankster,” and with other Wall Street pirates they collectively use their financial power to corrupt the commodities markets for corporate gain. JPM should report higher earnings and increase its dividend this year, but I’d sooner share a cab ride with a pimp – I mean a member of Congress – than own JPM in my portfolio.
I think Home Depot (HD, $35) is a dandy selection. HD, with 2,300 retail stores, has a strong balance sheet, superb management, greatly improving net profit margins, improving revenues and strong earnings.
And while new home sales are in the sink, lots of folks are beginning to improve their old homes, and Home Depot is the place to go. I came within .001 millimeters of buying 500 shares at $20 in March 2009, and now I think it can be a $55 stock in two years. Invest $10,000.
Fairholme Fund (FAIRX, $36.01) is a no-load, five-star, $17 billion portfolio fund with one of the best 10-year performance records in “Funddom.” Any fund manager, depending on the meds he takes, can be successful for a year or three before he flames out. But FAIRX’s Bruce Berkowitz has a nonpareil five-year, 8.17 percent total return and a supercalifragilistic 11.47 percent 10-year return. Invest $10,000.
And I like your broker’s speculative recommendation of Phoenix Cos. (PNX, $2.41), a $2 billion revenue life insurance and annuity products insurer that’s been in business since 1851 and is home ported in Hartford, Conn. PNX lost a bundle in 2009, made 0.04 cents in 2010 and the Street believes it will earn 0.43 cents this year.
The stock could run to $6 or $7 in the next 18 months. However, I’d only invest $5,000 in the common and then invest $5,000 in its 7.45 percent quarterly interest bonds (PFX, $19) maturing Jan. 15, 2032. The par value is $25, and the $1.8625 dividend yields just an inch above 10 percent. The combination will have created a synthetic convertible yielding 5 percent. PFX is rated B3 and doesn’t qualify for the 15 percent tax rate, so you might put it in your IRA.