.bodytext {float: left; } .floatimg-left-hort { float:left; margin-top:10px; margin-right: 10px; width:300px; clear:left;} .floatimg-left-caption-hort { float:left; margin-bottom:10px; width:300px; margin-right:10px; clear:left;} .floatimg-left-vert { float:left; margin-top:10px; margin-right:15px; width:200px;} .floatimg-left-caption-vert { float:left; margin-right:10px; margin-bottom:10px; font-size: 10px; width:200px;} .floatimg-right-hort { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 300px;} .floatimg-right-caption-hort { float:left; margin-right:10px; margin-bottom:10px; width: 300px; font-size: 10px; } .floatimg-right-vert { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 200px;} .floatimg-right-caption-vert { float:left; margin-right:10px; margin-bottom:10px; width: 200px; font-size: 10px; } .floatimgright-sidebar { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 200px; border-top-style: double; border-top-color: black; border-bottom-style: double; border-bottom-color: black;} .floatimgright-sidebar p { line-height: 115%; text-indent: 10px; } .floatimgright-sidebar h4 { font-variant:small-caps; } .pullquote { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 150px; background: url(http://www.dmbusinessdaily.com/DAILY/editorial/extras/closequote.gif) no-repeat bottom right !important ; line-height: 150%; font-size: 125%; border-top: 1px solid; border-bottom: 1px solid;} .floatvidleft { float:left; margin-bottom:10px; width:325px; margin-right:10px; clear:left;} .floatvidright { float:right; margin-bottom:10px; width:325px; margin-right:10px; clear:left;} Dear Mr. Berko:

Dear F.M.:

I think your broker needs a frontal lobotomy. CB Richard Ellis Group Inc. (CBG-$24.10) is a conglomeration of acquisitions over the past decade with names like Trammell Crow, Hiller Parker May & Rowden, L.J. Melody & Co., Koll Real Estate, REI Ltd. and Insignia. (Editor’s note: West Des Moines-based Hubbell Realty Co. is a CB Richard Ellis affiliate.) In those 10 years, CBG’s revenues went nuclear from $483 million to an expected $5.8 billion in 2007.

CBG is a highly respected and enormously successful global real estate firm providing its expertise to owners, lenders, lessors and lessees of office, retail, multifamily and commercial assets. Since 2002, CBG’s revenues increased fivefold, and earnings exploded from 14 cents to perhaps $2.10 a share this year. Impressive!

The stock price has performed just as well. Credit Suisse and Citigroup took CBG public in December 2004 at $19 a share. In March 2005, CBG was trading at $104 a share, then split 3-for-1. Wow and wow! By May of this year, the stock was trading in the mid-$40s, but today CBG acts as if it’s bleeding and wounded at $24.

The company has a strong balance sheet, good working capital and decreasing debt, and common stock represents about 69 percent of capital. Meanwhile, return on shareholders’ equity remains strong at 29 percent, return on capital is a respectable 16.3 percent, and operating margins of 16 percent and net profit margins of 9.3 percent suggest impressive leadership. CBG ticks like a Swiss watch even though 68 percent of its revenues derive from American soil.

Frankly, I wouldn’t go near this stock with my mother-in-law’s 3-million-volt Taser rifle. I wrote in a February column that the real estate market had “bubbled,” which was simple as Simon to see, while CBG was trading in the $37-$39 range. But in July JMP recommended CBG at $40, in June Wachovia couldn’t say enough good things about CBG’s future stock price and in May Goldman Sachs waxed eloquently that CBG was attractively undervalued. Meanwhile, the sophisticated research departments of several large retail brokerages exhorted their brokers to push CBG shares.

Well, CBG is now 14 to 15 points lower and Goldman Sachs just lowered its CBG rating from “buy” to “neutral.” NEUTRAL … hell’s bells, with crashing real estate prices and a real estate market soon to implode overseas, Goldman’s idiots don’t have enough smarts to yell “Sell!”

Meanwhile, Wachovia’s research nerds must be having a series of serious brain burps. Wachovia recommended CBG in June at $38, and though it’s 14 points lower, it’s still on the buy list. Few observers would be surprised if they learned that Goldman or Wachovia would pay dearly to get some investment banking or consulting business from CBG.

I recommend that you sell your 600 shares of CBG and take a $9,000 loss.

My second recommendation is to stop reading Goldman Sachs’ research. Between 1991 and 2003, I read reams of Goldman stuff and discovered very little of redeeming value. That conclusion is reflected by the performance of the various Goldman Sachs mutual funds. Not one of Goldman’s mutual funds has a standout performance record.

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