AABP Award 728x90

Consider DaimlerChrysler, Procter & Gamble shares


Dear Mr. Berko:

My mother wants me to buy 100 shares of DaimlerChrysler AG and 100 shares of Procter & Gamble Co. She says that because DaimlerChrysler has a new chief executive officer, the stock will now do well. My mother also says that because Procter & Gamble bought Gillette, this stock should do well. She only wants me to buy stocks that pay dividends, and she says DaimlerChrysler yields a very good 3.7 percent and that Procter & Gamble yields a sound 2 percent.

Mother always wrote you in the past and now she wants me to write you. In the past four years, she has helped me buy $190,000 in blue-chip stocks, and she wants me to have at least $1.5 million invested before I retire from my medical practice. I used to have a good portfolio; during the divorce, my wife took everything we had for herself and the children. So I’m basically getting started all over again. Prior to my divorce, I had a professional money manger, but my mother thinks I can do better with your advice and just buying blue-chip issues.

S.R., Oklahoma City

Dear S.R.:

I think DaimlerChrysler (DCX-$51.50) might be worth considering at today’s much lower price. Way back in 1998 and 1999, as your mother might remember, I wrote several columns suggesting that the stock was vastly overpriced (it was trading at $105), that DCX’s management was held in high contempt by many Chrysler executives, and that knowledgeable investors were dropping the shares like hot schnitzels and dumplings. They knew that Juergen Schrempp (the retiring CEO) didn’t have the “right stuff” and was making some seriously stupid decisions. And right as rain they were, because under Schrempp’s iron-fisted tenure, the stock plummeted from $105 all the way down to $26 a share.

Sadly, Schrempp lacked the people skills to run this company. Oh, he was magnificently knowledgeable, but he was ice-cold, arrogant and lacked compassion, humility and patience and practically demanded his subordinates salute. Juergen might have made a great military commander. Under his iron reign, Mercedes quality and dependability began to crumble, and quality is still a problem today, which is reflected by lower Mercedes sales and lagging profits.

Improved earnings may be a way off as expenses related to “quality improvement” will continue to limit profits this year and in 2006. Well, “that’s the way the Mercedes Benz!” Schrempp will be gone by year’s end (he won’t even remain on the board), and most institutional investors are breathing sighs of relief. The new CEO, Dieter Zetsche, unlike Schrempp, is a communicator and has a reputation for being open, listens to opinions and is not dictatorial. It seems that Zetsche has the support of the worldwide investment community, and that may be good for the stock price. Your mother might have good timing.

I like Procter & Gamble Co. (PG-$54.18). How can one not like a company that has increased its earnings and dividends every year for the last 20 or more years and has a management team that is as good as the crowd at General Electric?

The merger between P&G and Gillette is being delayed because the European Union regulators need time to make certain this merger will not lead to unfair competition. So far, those idiots across the pond have determined that P&G must sell its battery-operated toothbrush division before they will approve the marriage.

Your mother knows that there isn’t a mom-and-pop grocer, a gas station, a convenience store, a beverage mart or a drugstore in the United States that doesn’t carry a P&G product used by 68.439 percent of American consumers on a daily basis.

This is a company that in the past 10 years tripled its share earnings to an expected $2.69 this year and tripled its dividend to $1.12 this year. This is a company whose management increased its net profit margins from 7.6 percent in 1995 to an expected 13 percent this year and whose operating margins increased 50 percent in that same time frame. This is a company that makes its money from products such as Always, Hugo Boss, Charmin, Downy, Eukanuba, Fixodent, Folgers, Gleem, Herbal Essences, Iams, Joy, Luvs, Max Factor, NyQuil, Old Spice, Pampers, Sure, Tampax and Zest, just to name a few popular items. Well, P&G sounds like a fine company to me — so fine that I’m required to tell you that I as well as many of our managed accounts own shares of P&G, and we intend to own those shares for a long time, too. So, Doc, follow Mother’s advice and buy this one also.

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

prairiemeadows brd 020123 300x250