Dear Mr. Berko:

Please tell me about Home Depot. I bought it at $51 in 2002, and it can’t seem to get back there. Also, what do you think of Genesee & Wyoming Railroad? I am thinking of buying 200 shares.

R.T., Vancouver, Wash.

Dear R.T.:

I have ceased to be a Home Depot Inc. (HD-$38.79) aficionado. Though Standard & Poor’s still has a “strong buy” on the stock, Goldman Sachs recently downgraded it from “buy” to “neutral,” Credit Suisse just changed its ranking from “outperform” to “neutral” and Prudential Securities initiated coverage on HD at “underweight.”

It seems that Lowe’s Cos. Inc. (LOW-$30.90) is gaining on Home Depot.

Several weeks ago, I went to buy a ladder, paintbrushes and related equipment at HD. As I waited in one of those painfully slow lines, an employee not too nicely suggested that I queue up to the store’s computerized self-checkout counter. I’m always in favor of fast, courteous and friendly self-service. But I turned on my heels and skedaddled to Lowe’s.

I’ve had my fill of demanding digital instructions. I won’t hunt for a silly key, then try to follow coded instruction etched in billions of green pixels, insert a credit card (I want to pay cash) and wait for it to have a private conversation with a damned microchip while I’m balancing 25 pounds of merchandise on my other hand. No siree, Home Depot and Chief Executive Officer Robert Nardelli can take those computerized checkout stations and shove ’em.

(Lowe’s has them, too, but I’ve never been told to use one.)

So I bebopped to Lowe’s. The nice lady took my money with a “have a nice day” smile, and now HD is on my PTA (places to avoid) list.

When Arthur Blank (founder and former CEO of HD) retired, Home Depot shares began to lose momentum. Blank has an energizing persona; he could walk through any store and call most employees by name. He was warm, personable, magnetic and charismatic, and you could feel his electricity.

The new CEO, Nardelli, is certainly no Arthur Blank. Nardelli is a stiff, formal and anal-retentive bean-counting CEO who looks at people as an entomologist might study a beetle. Whereas Blank managed Home Depot from the bottom up, allowing the employees to give him the authority, Nardelli manages from the top down, imposing his authority on the employees below. The difference is certainly reflected in the performance of the stock during the past few years.

P.S. There’s talk that HD might be a leveraged buyout candidate in the near future.

Genesee & Wyoming Inc. (GWR-$27.87) owns, leases and operates 49 short-line regional railroads in the United States, Canada, Bolivia, Mexico and Australia with 9,300 miles of owned or leased track plus the right to use 3,000 miles under track access arrangements. Revenue growth has been superb in the past four years (from $173 million in 2001 to $385 million in 2005), and net income per share doubled from 59 cents to $1.19. This year, revenues should climb to $445 million, and net income might reach $1.45 a share.

GWR’s North American system contributed 79 percent of the company’s income, Australia contributed 19 percent, and Bolivia and Mexico were responsible for 2 percent. The Mexican line is losing money, and management believes that Bolivia will nationalize GWR’s engines and tracks there. Good riddance to both of them.

Thomson Financial expects GWR’s revenues to top $525 million in 2007 and figures per-share earnings will exceed $1.65. Some of the company’s growth will be fueled by acquisition. So far this year, GWR purchased the Chattahoochee & Gulf Railroad serving parts of Alabama and Georgia and recently bought the 12.5-mile rail line to the Portsmouth Container Terminal. Other acquisitions are on track, and there’s plenty of money available from the recent sale of its Australian line for $208 million. GWR plans to use that money to increase its short-haul properties in North America.

Since 2001, GWR has split its stock 3-for-2 on four occasions, and the shares reached an all-time high of $36 this year. The company has plenty of cash, low debt and record net profit margins of 15.1 percent. Value Line believes GWR can be a $70 number in three to four years.

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