Berko: The Five Stooges and Alaska
Friday, September 20, 2013 7:00 AM
Dear Mr. Berko:
Because you recommended Capstone Turbine when it was trading at 90 cents, I bought 10,000 shares in January at 88 cents. You said it was very speculative, and you were very honest in your recommendation by saying the only reason it was selling for 90 cents was that the smart professionals in the investment community didn’t think it was worth more than 90 cents. The stock went up to $1.52 in July, but now it’s crashed to $1.17. Should I buy more or sell and take my profit? And what do you think of First National Bank Alaska as a long-term investment? It trades at $1,794.99 a share and may split 100-for-1. At the split price, I could buy 600 shares if you recommended the stock.
G.N., Moline, Ill.
I did not recommend Capstone Turbine Corp. (CPST-$1.17) but rather discussed and complimented its product, which I still believe is an amazing low-maintenance, easy-to-install, low-cost, cutting-edge technology that produces impressive and highly efficient results. I told a reader that if he could afford to risk $5,000, then CPST might be a good speculation. And apparently, it was. The revenues of this California company have grown tenfold in the past 10 years. However, its grossly incapacious management team seems to have a systemic allergy to profit. And those reasons are namely Darren Jamison, Eddie Reich, J.L. Brooks, Jim Crouse and M.G. Gilbreth. These are the Five Stooges, and they run CPST and are responsible for its $400 million of cumulative losses since 2004. These serial losers couldn’t manage a two-car funeral procession on a deserted one-way street in broad daylight.
There are six analysts following this microturbine technology company, and not one of them expects CPST to report a profit this year or next. So it’s no wonder that in June, Jamison, Reich and Crouse cumulatively sold more than 1.3 million shares. CPST has, inarguably, an impressive product. Its low-emission turbines produce clean, green and affordable heat and cooling power at significant savings over traditional sources. Revenues are expected to increase again next year, but profits are unlikely. CPST needs an industrial-sized enema, and it doesn’t have much of a future as long as the Five Stooges remain in control. But hold the stock, because there could be another 25-cent increase in the price, and on 10,000 shares, that would be $2,500.
Alaska is a big piece of ground that’s been around for a long time. But who needs all that land and ice and snow? Frankly, Alaska ruins the beautiful symmetry of the continental United States. It just darn ruins it! And who needs First National Bank Alaska (FBAK-$1,794,99)? This is a teeny little bank based in Anchorage, with 323,021 shares outstanding and $145 million in revenues. Its chief executive officer and chairman is 93-year-old D.H. Cuddy, who has been CEO since 1951 and, according to one of my sources, is also a close friend of Sarah Palin's, though Cuddy says he never has met her. Last year, FBAK earned $118 a share, and rumor suggests that FBAK could earn a tad more this year. I say rumor, because there’s not an analyst or brokerage I know that follows this stock. Wright Investors’ Service has a current 37-page report, but that research piece will set me back $450, and I don’t care enough about FBAK to spend that kind of money. The $100 dividend yields 2.8 percent, and the shares trade either a few hundred shares a month or by appointment.
FBAK has 30 branches, 12 of which are in Anchorage. The others are in big towns such as Seward, Palmer, Kodiak, Wasilla, Valdez, Juneau, Homer and Healy. There’s little to no growth in this issue, and from my perspective, the shares are not even worth thinking about. The dividend has remained at $50 since 2003, when revenues were $127 million, earnings were $129 a share and the stock traded at $2,300. And to the best of my knowledge, there’s no possibility of a stock split before Oct. 7, 2020.