Berko: Take a gamble on OCZ Technology Group
By Malcolm Berko Taking Stock January 17, 2013 5:52PM
Updated: February 19, 2013 1:52PM
Dear Mr. Berko: Could you please advise me about buying 3,000 shares of OCZ Technology Group at $2 a share as speculation. My brother, who is a self-employed computer “something,” told me that an investment in this stock could triple in 18 months. He won’t tell me why, but I know that he just bought 15,000 shares. I also know that his most recent two cheap stock recommendations went into the crapper and I lost money on both. But I bought 2,500 shares of Flexible Solutions International at $1.90 a share in 2011 at his recommendation and sold it at $6 a year later. And in 2008, I bought 15,000 shares of Quantum at 40 cents and sold it at $2 six months later.
Also, my wife, after 27 years of teaching and suffering years of physical and verbal abuse from students, is going to quit this May. Thank goodness. We want to take out the funds in her retirement system and put them in an individual retirement account with Fidelity Funds. Could you select 10 of the best mutual funds for her to invest in (about $25,000 in each) for our retirement?
Dear HSH: Holy smoke, Henry, Michigan’s Public School Employees Retirement System is underfunded by nearly $50 billion; that’s billions, not dinky millions! And I doubt that Michigan will allow retired employees to remove money that’s not there. Have your wife contact human resources ASAP and find out what her choices are. I tried to speak with two of the system’s intelligent, articulate, happy, helpful stupids, but they wouldn’t give me the time of day. At the end of last year, there were 233,128 employees (and declining) contributing to the system, while 200,488 retirees were pulling money out. The system is terminally ill and should be under hospice care.
Ten years ago, your payroll taxes to the system were 12 percent; today they’re 31 percent, and the system can’t linger much longer without massive surgery. The big joke on everybody is that politicians in Lansing, whose retirement system is rock-solid, and your wife’s union representatives, whose retirement is equally solid, believe they can fix the system without reducing benefits.
That attitude makes me long for the days when our country was just morally bankrupt. Besides, I can’t help you select 10 of Fidelity’s best mutual funds! Fidelity has more than 2,500 funds (normal Wall Street excesses), and it would take me a month of Mondays to review and compare each. I keep a few Fidelity mutual funds in my recommendation bag, but I don’t know enough about your circumstances to determine whether they would be suitable for your goals. If you can find a competent and trustable adviser, please hire him.
OCZ Technology Group (OCZ — $2) has built on its expertise in high-speed memory to become a dominant player in the manufacturing and distribution of solid-state drives, a game-changing technology that’s replacing traditional magnetic hard disk drives. Solid-state drives are faster, are more reliable, run cooler and use significantly less power than hard disk drives, which are used in most computers today.
OCZ’s revenues have grown from $20 million in 2004 to more than $400 million last year, so it’s doing something right.
Well, let’s see! OCZ earned 4 cents a share in 2006, 2 cents in 2007 and 7 cents in 2008. But during the past four years, OCZ has lost more than $71 million. OCZ has a book value of $3.87, about 70 cents in cash per share and zero debt. But OCZ has a negative cash flow of $122 million and a return on equity of minus 7.7 percent, and the stock price has melted from $10 in February 2012 to a low of $1.11 in November.
Someone should take over this company. However, I’m not even sure Waste Management (WM — $35) would buy OCZ. Considering the low insectile hum that seems to derive from its San Jose, Calif., executive offices, I think OCZ’s best chance for help is Orkin. Still, this may be a good gamble, so consider putting $6,000 on this pony.
Address your financial questions to Malcolm Berko, P.O. Box 8303, Largo, FL 33775, or email him at firstname.lastname@example.org.