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Dear Mr. Berko:

Dear R.R.:

Four brokerages on Wall Street have a “strong buy” on Ralcorp Holdings Inc. (RAH-$60.36). Last year, RAH was highly regarded by Lehman Bros., JPMorgan Chase & Co., Credit Suisse Group, AG Edwards & Sons Inc. and quite a few other semi-respected stock brokerage firms.

RAH is a producer of private-label breakfast cereals, crackers, cookies, snacks, jams, syrups, salad dressing, sauces, frozen griddle products and frozen pre-baked products, and the most delectable, delightful, delicious and piquant edibles I’ve had the pleasure of sampling. They are sold under names like Nutcracker, Carriage House, Bakery Chef, Bremner, Bloomfield and, of course, Ralston Foods.

A large portion of RAH’s $2.6 billion in revenues is derived from products it makes for large grocers under the Kroger, Publix, Safeway and Weiss labels. RAH has had a stellar record of revenue and earnings growth for more than a decade, and earnings for 2008 should come in at $3.40 a share. But profit margins, which were 5.7 percent in 1998, have been trending steadily south to 3.6 percent this year.

However, RAH’s recent $2.6 billion purchase of Post cereals should improve operating margins, because the synergies were too impossibly good to pass up.

RAH is a small-cap company with 26 million shares outstanding. Its 16 percent return on shareholders’ equity is superb, cash flow continues to be strong, and long-term debt continues to decline.

I really like RAH. However, rising commodity prices are taking a big bite from margins, and packaging costs have risen through the roof. Management has increased prices, which has hurt revenues, and there seems to be little relief in sight. Though RAH trades at just 16 times its value, I reluctantly suggest you sell your 130 shares.

RAH doesn’t pay a dividend, and a six-month, 4.25 percent certificate of deposit will give you some decent income with absolute safety.

Goldman Sachs Structured Large-Company Growth Fund is a $1.9 billion open-end mistake with a 5 percent deferred sales charge that went public in May 1997. Since then, this two-star abomination has posted an unforgivable 10-year average return of minus 1.08 percent.

Since the initial public offering, Goldman Sachs has euchred nearly $2,000 of management costs from thousands of fools who got suckered by the magic Goldman name and invested $10,000.

I used to know Guy Levy, the late senior partner of Goldman, and enjoyed visits with Gus and his wife at their New York penthouse during the late 1960s and early ’70s. Gus had many friends because his business ethics were honorable; he was kind and cared for his people and Goldman’s clients.

Gus measured Goldman’s success by its contributions to the world community, not by the size of its bank accounts. That’s not the Goldman Sachs culture now. If Gus were alive today, he’d turn over in his grave.

Sell that Goldman mutual fund plus your two foreign funds now. Most foreign funds have posted low, negative, double-digit returns this year and might repeat that performance next year and possibly in 2010.

Please address your financial questions to Malcolm Berko, P.O. Box 1416, Boca Raton, Fla. 33429 or e-mail him at malber@adelphia.net. © Copley News Service