Where there’s a Weill, there’s no way
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Dear Mr. Berko:
I wrote to you last May about Citigroup, and you told me to sell my 140 shares then, when it was trading at $26. I didn’t. Now it’s trading at less than $4, and I don’t know if I should hold it, because it can’t fall much lower, buy 160 shares, or sell it. Why is Citigroup having so much more trouble than Bank of America and other big banks? Do you think Mr. Weill should tell the board that he wants to come back and manage the company again? I would also like to get a 5 percent return on $45,000 that I have coming due in certificates of deposit. The best bank offer is 2.5 percent for one year. Are there any stocks you could recommend that are safe enough and would give me a 5 percent return?
R.E., Galesburg, Ill.
Dear R.E.:
No! One thousand times, no! Sanford I. Weill’s return to Citigroup Inc. would be a disaster. In fact, his bank management philosophy might collapse the entire banking industry.
I knew Sandy Weill back in 1972 when he was a partner in a brokerage firm called Cogan, Berlind, Weill and Levitt. Weill was basically a deal-maker. He didn’t have the skills to manage a Yankee Stadium pretzel stand and wasn’t well-liked by his partners.
Weill built Citigroup (C-$3.53 ) into a Rube Goldberg contraption without a single interchangeable part. He is a “serial deal-maker,” addicted to and drunk on the power he believed it gave him. One of his partners commented that Weill “exaggerated so often that he had to hire a stranger to call his dog.”
I’ve never been comfortable with Citigroup nor its egomaniacal Sandy Weill, and I have never recommended the stock in this column. Weill’s failure at C is attributable to his temper and a self-image that brooks no disagreement. His inability to recognize the importance of people skills in his managers and his unbelievable stupidity encouraged him to believe in a one-stop shopping experience for C’s customers.
Weill is expert at screwing up all sorts of financial institutions after making billions from them. According to a close acquaintance who used to be among Weill’s inner circle, “Sandy offered to return to Citigroup; however the directors declined to accept his offer.” This same acquaintance said: “If Sandy bought a hardware franchise, he’d then try to buy the companies that made hammers, nuts and bolts, caulking, keys, molding, paint and brushes. He’s like that. He doesn’t care to make a company more profitable by effective management; he just wants to make it bigger.”
The purchase of another 100 shares of Citigroup would be a speculation, not an investment. I don’t have any problem with that purchase, just as long as you’re mindful that nobody knows what the future holds for this company that Weill stuffed like a Christmas goose.
Put your $45,000 in a money market account for now and use it to purchase the following issues:
Southern Co. (SO-$33.34) is one of the best-managed and largest utilities in the country. The current dividend of $1.68 yields about 5 percent. However, I’d like you to place an open “good till cancel/do not reduce” order to buy 200 shares at $30, which will give you an attractive and quite dependable 5.6 percent current return.
ConAgra Foods Inc. (CAG-$17.46) is a huge packaged-food company that provides branded, private-label and custom-food products, such as condiments, snacks and desserts, to retail food and service outlets. The current 76-cent dividend yields 4.4 percent and has been increased every year since 1982. Place an open GTC/DNR order with your broker to buy 300 shares of CAG at $14.75. At that price, CAG will have a current 5.6 percent return.
The Home Depot Inc. (HD-$22.40) is a huge home-improvement retailer operating primarily in the United States, Canada and Mexico. New management, which took over from Robert “Nasty” Nardelli, is doing yeomen’s work of making HD a powerhouse again. The 90-cent dividend yields 4 percent and has been increasing every year since 1982. Place an open GTC/DNR order with your broker to buy 300 shares at $17.60. This price will give you a 5.3 percent yield.
VF Corp. (VFC-$56.92) designs, manufactures and markets branded apparel and related products to department stores, national retailers and licensees. The current $2.36 dividend has been raised in each of the past 26 years and yields 4.1 percent. Tell your broker to place an open GTC/DNR order to buy 100 shares of VR at $39. At that price, the current yield is a swell 6 percent.
Buy 100 shares of FPL Group Inc. (FPL-$52.71), which used to be called Florida Power & Light until some crack-smoking directors decided to modernize the name. FPL serves some 4.5 million residential, commercial and industrial customers in Florida. The current $1.78 dividend yields 3.4 percent. I recommend placing an open GTC/DNR order to buy 100 shares at $34.45, which will give you a current 5.2 percent dividend return.
These purchases total about $22,000. I would rather you only invest half your $45,000 and keep the remaining half in a certificate of deposit or a money market account just in case other great ideas pop up in the next few months.
Please address your financial questions to Malcolm Berko, P.O. Box 1416, Boca Raton, Fla. 33429 or e-mail him at malber@comcast.net. © 2009 Creators Syndicate Inc.
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