Dear Mr. Berko: We bought 1,000 shares of Torchmark at $14, and after two splits, we’ve got 2,250 shares worth $88 each. We bought 1,000 shares of Universal Display at $22, and it’s now $121. And we bought 1,000 shares of American Tower at $23, and it’s now $146. We have other stocks with good gains, though not so good as those above. The stockbroker who sold us these issues changed firms last January. He joined a small brokerage we never heard of, so we didn’t follow him. Another reason we didn’t move is it’s a record-keeping mess to change firms.
Our account is handled by a nice young man, but he lacks the gravitas (my wife’s word) of our other adviser. He wants us to sell the above three issues and put half the proceeds in a fixed annuity and half in a tax-efficient income-growth mutual fund. This broker wants to change the direction of our account from growth and income to income because I plan to retire from my medical practice next June. You wouldn’t believe the government crap we have to process every day.
We need to know whether we should sell the above issues, because neither of us has enough confidence in this broker. And we need advice on what income issues to purchase. My wife, also a physician, and I are both 57. We both plan to do locum tenens work, which will allow us to travel and work a few weeks in various cities around the country. Your advice is greatly appreciated. — RS, Atlanta
Dear RS: Wow! Quickly adopt your original broker.
Torchmark (TMK) at $14, American Tower (AMT) at $23 and Universal Display (OLED) at $22. You must have angel friends living in heaven! If you hadn’t sent me the name of your previous broker (whom I know), I’d have thought you were funning me. The process of changing firms years ago was as much fun as an anal probe. Today it’s instantaneous; just a tap on the key and then trouble begins.
Keep your AMT, which is a real estate investment trust and the largest owner-operator of broadcast and wireless towers in the world. AMT has 27,000 sites in the U.S. plus 143,000 sites in numerous locations overseas. This is an excellent growth-income issue that has a jim-dandy record of revenue, earnings and dividend growth. There are 22 brokers who follow AMT. Twenty-one of them have “buy” recommendations; one brokerage says to “hold.” AMT is a sweet keeper for income-minded long-term investors.
Torchmark is the parent company of Liberty National Life Insurance Co. This is a dandy growth stock, with impressive revenue, earnings and principal growth over the past 20 years. It pays a mingy dividend, but instead, management has been using earnings and free cash flow for years to repurchase 62 percent of its outstanding shares. That’s impressive! TMK’s various subsidiaries sell life and health insurance products and annuities in the U.S., Canada and New Zealand. Even though TMK has impressive operating fundamentals and a strong capital base, there’s not an analyst on Wall Street sporting a “buy” recommendation. So my gut tells me that TMK’s long-term appreciation potential is not very high. Sell TMK. Take your $184,000 profit and weep!
The shares of Universal Display move up and down like a yo-yo on stilts. OLED’s engaged in the research, development and commercialization of organic light-emitting diode technologies and materials for use in flat-panel display and solid-state lighting. OLED licenses its technologies to manufacturers of cellphones, laptops and other portable devices. Earlier this year, OLED traded above $200 a share. OLED has impressive earnings potential, and if you can handle the volatility, the stock is a keeper.
Move your account back to that old broker. He is a known quantity and isn’t interested in selling high-commission products such as annuities and mutual funds. It doesn’t make a tinker’s dam worth of difference which brokerage firm you use; they all sell the same stuff at the same prices. It’s the adviser who represents you that makes all the difference.
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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