Thursday, September 27, 2007

U.S. too Dumb for Barnes & Noble Stock

I often read financial advice columns from around the country but I never follow the advice given about investing, or not investing, in the individual stocks mentioned. I figure that by the time the information hits newspapers or magazines it's too late to take advantage of it because all the "big money" has already moved and it's too late for the little guy. That said, I did find Malcolm Berko's warning about Barnes & Noble stock interesting because of the reasoning that he used to steer his readers away from purchasing the bookseller's stock.

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...


Vail, Colo. Dear D.N.: Barnes & Noble Inc. (BKS-$36.07) is a very poor choice. You don't want BKS in your portfolio because future revenue gains will be niggardly due to 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 are basically 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 to earnings of $2.18 in 2006.
I have to admit that this rather strange combination of hard facts and editorializing put a smile on my face this morning. Mr. Berko seems to enjoy his work.


  1. Heh, now there's a professional analysis. Would he change his mind if someone told him B&N sells DVDs?

  2. That's crazy. Genetic intellectual decifict, eh? (Not that I don't agree with him...). I'll have to remember that one.

  3. It's certainly a bit different, isn't it, Mella?

  4. Danielle, I'm not ready to agree that it's a genetic problem. :-)

    I think its more of an environmental one...our kids just have too many worthless distractions these days and they don't seem to focus on the more worthwhile things on offer. Sad.

  5. I'd agree environment plays a larger role. NPR had a depressing segment tonight on the shrinking numbers of people who watch their local news. It's expected to be gone in 3 years. That and statewide information isn't broadcast much. It's....hyperlocal, I think was the buzz word they used.


  6. That NPR piece kind of surprises me, Carrie. Local news seems to be alive and well here in Houston with at least half a dozen TV stations getting decent ratings for their nightly broadcasts. I don't watch every day, but I do check in several times a week.