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If it’s in a can …


Dear Mr. Berko:

I bought 50 shares of Ball Corp. in 2001 at $80 and now have 200 shares with a profit of more than $9,000. What do you think of this company? My broker insists the market is going to crash this year and wants me to sell all my Ball and put the money in a government GNMA fund for safety that pays 4.4 percent. Please advise.

P.P., Lady Lake, Fla.

Dear P.P.:

Though your broker may be right, you gotta be dumber than a woodpecker to follow his greedy advice and get slugged with a $650 commission to buy a GNMA (Ginnie Mae) fund, especially when interest rates look to be headed higher.

If you’re into graffiti, you are probably using an aerosol paint can made by Ball Corp. (BLL-$69.50). If you use an aerosol deodorant, cooking spray, whipped cream, etc., you’re probably using a product made by BLL. In fact, Ball is the largest maker of aerosol cans in the United States.

Ball also makes aluminum containers, so if you drink pop, beer, fruit juice, energy drinks and other beverages from a can, you are probably drinking those gustables from a BLL product. The company produces more than 100 million of these recyclable aluminum cans every day, seven days a week.

When you do your grocery shopping for corn, asparagus, soup, tuna, beans or potatoes, you are likely buying those comestibles in a BLL tin can. And when you buy butter cookies, peanuts, shoe wax, car wax, popcorn, coffee, snuff, etc., they all come in a Ball can whenever they can.

The company doesn’t sponsor golf tournaments, and it doesn’t have a sports arena named for it. BLL is a quiet company, and its products sit mutely on the shelves of every convenience store, drugstore, supermarket, paint store and hobby store in the United States, plus a few other countries. The can business provides 91 percent of BLL’s $7.4 billion in revenues; the high-tech division has just under $700 million in sales.

BLL has been a darn fine long-term investment, and I think it will continue to be a darn fine long-term investment. Management has improved the company’s net profit margin from 3.1 percent 10 years ago to 5.7 percent last year. Two analysts tell me that they believe Ball will continue to increase its net profit margins, predicting 6.6 percent by 2015.

Long-term debt is declining, shareholder equity has tripled in the last 10 years and free cash flow has increased 400 percent since 2001, but the dividend is niggardly. As you know, the shares split 2 for 1 in 2002 and 2004, and there’s talk the shares may split again this year if the price moves to the mid-$70s, which is very possible.

BLL earned $4.05 per share in 2009, increased earnings to $4.60 last year and those analysts think the company could earn $5.30 this year. So with an average price-to-earnings ratio of 13.5, a $70 to $75 price objective is reasonable. Because Ball’s contracts allow for raw material increases to be passed on to its customers, it’s reasonable to expect earning growth of 11 percent to 15 percent over the following few years.

Don’t sell. But place a good till canceled, do not reduce, stop-loss order at $60 and move it up as the stock rises in value.

Please address your financial questions to Malcolm Berko, P.O. Box 1416, Boca Raton, Fla. 33429 or e-mail him at malber@adelphia.net. ©2011 Creators.com

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