Bank on NBG; don't make book on Barnes & Noble
Bank on NBG; don't make book on Barnes & Noble

By Malcolm Berko Comments 1
Published: September 30, 2007

Dear Mr. Berko: I'm considering an investment of $6,000 in each of the following three stocks: Barnes & Noble, Advanced Life Sciences and National Bank of Greece.

My goal is long-term growth with moderate risks. Because the market has gone up so much in the last year or so, it's becoming harder to pick good stocks.

So if you have any recommendations for me to look at I'd appreciate your thoughts on four or five stocks you think will do well over the next few years.

D.N., Vail, Colo.

Dear D.N.: Barnes & Noble Inc. (BKS-$35.26) is a very poor choice. You don't want BKS in your portfolio because future revenue gains will be miserly because of competition from video games, the Internet, TV and a declining literacy rate.

Many Americans between ages 10 and 40 are infected with a genetic intellectual deficit. (We are observing a phenomena called "the dumbing down of America” and what Dan Rather calls "the dumbing down of the news.”)

Revenue growth for BKS is suffering and books that sell best are of the Harry Potter genre, which basically are bubble gum for the mind. Meanwhile, heavy discounting to attract buyers and competition from Amazon has crippled earnings.

Net profit margins are getting squeezed and BKS expects to report lower 2007 earnings of $1.75 compared with earnings of $2.18 in 2006.

However, SunTrust, Prudential, Matrix Research and Stifel Nicholas each rate BKS a "buy.” Even so, stay away from BKS.

Advanced Life Sciences Holdings Inc.

Advanced Life Sciences Holdings Inc. (ADLS-$1.79) is among the multitude of tiny, inconspicuous biopharma companies that focus on small-molecular therapeutics in the field of oncology, inflammation and infectious diseases.

ADLS has licensing agreements with University of Illinois, Baxter Labs, Argonne National Laboratory plus Abbot Labs and has signed pacts with Novartis, Medimmune and Medirex.

Meanwhile, ADLS's Cethromycin was just given an "Orphan Drug” designation granting ADLS seven years of marketing exclusively.

Cethromycin is a treatment for anthrax and "community acquired pneumonia;” and the U.S. Army Research Institute of Infectious Disease is collaborating with ADLS.

There are only 28 million shares out and I think Cethromycin plus some of ADLS's R&D efforts will produce dividends.

I'm comfortable owning the stock as a wild speculation but sell it if it reaches the $5.50-$6 level.

National Bank of Greece SA

The National Bank of Greece SA (NBG-$12.91) is the largest bank in that archival country.

Earnings have grown fourfold, from 24 cents a share in 2003 to an expected 97 cents a share this year on a 70 percent increase in revenues to $5.7 billion.

And NBG's 27-cent dividend, which may be raised to 33 cents later this year, yields 2.3 percent.

NBG, which has been growing at 25 percent a year compared to 10 percent for European banks, appears to be a compelling opportunity to participate in booming Southeastern Asia.

The bank has a huge cash position of $17 billion or $7.25 a share, boosts a 29 percent profit margin and a 23 percent return on equity.

Management has been actively making careful acquisitions in Bulgaria, Turkey, Romania and Serbia and has profitable operations in Egypt, the U.K. and Cyprus.

NBG has 570 branches, 1,400 ATMS and does everything that CitiBank or Bank of America does but does it better in Europe and Southeastern Asia because that's closer to its home turf.

Recent quarterly earnings were up 52 percent, a result of strong economic demand in Turkey and Romania and earnings for the following quarters may zoom to because of the strong business environment in Southeastern Europe. Founded in 1841, I'd be a buyer of this classy bank in a heartbeat.

Yes, it's becoming difficult to find cheap issues in this market. But I'm not comfortable pre-empting future columns.

However, if you continue reading I'm sure there will be some attractive issues that may interest you.

Address your financial questions to Malcolm Berko, P.O. Box 1416, Boca Raton, FL 33429 or e-mail him at malber@comcast.net.