Berko: Capstone still a speculative play
BY MALCOLM BERKO Taking Stock September 18, 2013 10:00AM
Updated: October 19, 2013 7:22PM
Dear Mr. Berko: Because you recommended Capstone Turbine when it was trading at 90 cents, I bought 10,000 shares in January at 88 cents. You said it was very speculative, and you were very honest in your recommendation by saying the only reason it was selling for 90 cents was the smart professionals in the investment community didn’t think it was worth more than 90 cents. The stock went up to $1.52 in July, but now it’s crashed to $1.07. Should I buy more or sell and take my profit? And what do you think of First National Bank Alaska as a long-term investment? It trades at $1,751 a share and may split 100-for-1. At the split price, I could buy 600 shares if you recommended the stock.
Dear GN: I did not recommend Capstone Turbine (CPST-$1.07) but rather discussed and complimented its product, which I still believe is an amazing, low-maintenance, easy-to-install, low-cost, cutting-edge technology that produces impressive and highly efficient results.
I told a reader that if he could afford to risk $5,000, then CPST might be a good speculation. And apparently it was.
The revenues of this California company have grown tenfold in 10 years. However, its management team seems to have a systemic allergy to profit, with $400 million of cumulative losses since 2004.
There are six analysts following this microturbine technology company, and not one of them expects CPST to report a profit this year or next. So it’s no wonder that in June, the CEO, CFO and marketing VP cumulatively sold more than 1.3 million shares.
CPST has, inarguably, an impressive product. Its low-emission turbines produce clean, green and affordable heat and cooling power at significant savings over traditional sources. Revenues are expected to increase again next year, but profits are unlikely.
CPST doesn’t have much of a future as long as its present leaders remain in control. But hold the stock, because there could be another 25-cent increase in the price, and on 10,000 shares, that would be $2,500.
Alaska is a big piece of ground that’s been around for a long time. But who needs all that land and ice and snow? Frankly, Alaska ruins the beautiful symmetry of the continental United States.
And who needs First National Bank Alaska (FBAK-$1,751)? This is a teeny little bank headquartered in Anchorage, with 323,021 shares outstanding and $145 million in revenues. Its chief executive officer and chairman is 93-year-old D.H. Cuddy, who has been CEO since 1951 and is also a close friend of Sarah Palin’s.
Last year, FBAK earned $118 a share, and rumor suggests that FBAK could earn a tad more this year. I say “rumor” because there’s not an analyst or brokerage I know that follows this stock. Wright Investors’ Service has a current 37-page report, but that research piece will set me back $450, and I don’t care enough about FBAK to spend that kind of money.
The dividend yields 2.8 percent, and the shares trade either a few hundred shares a month or by appointment.
FBAK has 30 branches, 12 of which are in Anchorage. The others are in big towns such as Seward, Palmer, Kodiak, Wasilla, Valdez, Juneau, Homer and Healy.
There’s little to no growth in this issue, and from my perspective, the shares are not even worth thinking about. The dividend has remained at $50 since 2003, when revenues were $127 million, earnings were $129 a share and the stock traded at $2,300. And to the best of my knowledge, there’s no possibility of a stock split before Oct. 7, 2020.
Address questions to Malcolm Berko, P.O. Box 8303, Largo, FL 33775, or email firstname.lastname@example.org.