Dow Chemical and Microsoft

Dear Mr. Berko:

My broker is excited about Dow Chemical because they have developed roof and siding shingles that contain embedded solar chips. He says these shingles can be put on by any handyman or even the home's owner. And that makes the labor cheap. The only big cost is paying an electrician to plug in the array. He thinks that this product, once it becomes nationally known and available, will be to Dow Chemical what the iPad and iPhone is to Apple. He wants me to sell 600 shares of Microsoft that I bought in late 2007 at $35, take a loss of nearly $7,000 and use the money to buy 500 shares of Dow. I hate to take a loss in Microsoft because I think it's a great company, and I think it will come back. But I hate to miss out on this opportunity with Dow Chemical. Please advise.

M.B., Wilmington, N.C.

Dear M.B.:

You certainly picked a lousy time to buy Microsoft (MSFT-$25.50); in fact, you couldn't have picked a worse time because you bought it at the top of a seven-year cycle. MSFT has enormous institutional ownership, and for the life of me, I can't figure out why the brain dead managers at Vanguard, Wellington, Investment Company of America, T. Rowe Price and others own billions of shares of an asset that hasn't done diddly squat in the last 10 years. And I strongly doubt that the next seven years will bring MSFT back to your original purchase price.

MSFT is no longer a growth company, and management is actually struggling to find new products to keep its 94,000 employees (30 percent of whom could leave and their absence would not be missed) gainfully employed. Even Bill Gates' good buddy Warren Buffett knows that, which is why he doesn't own a single share.

And it amazes me that UBS, Standard & Poor's, Merrill Lynch, Argus, Janney Montgomery, Goldman Sachs and legions of other brokerages have a "buy" rating on MSFT. That doesn't say much for the reliability of Wall Street research. So sell it and don't look back.

And by the way, Apple's operating system is superior to MSFT's by orders of magnitude.

Meanwhile, Dow Chemical's (DOW-$27.05) solar chip shingle (can you say that quickly three times?) called Powerhouse was introduced in late 2009. The solar shingles use photovoltaic solar panels that are embedded in standard asphalt roofing panels. Powerhouse is available in limited quantities and should be widely available in early 2011 at your favorite shingle store. Special installation skills are not required; even a college graduate should be able to do it.

Now while Powerhouse is a sliced bread product, it won't have much impact on the price of DOW's stock. There is lots of competition - many not as good, some as good and some even better. But DOW, a $53 billion revenue company whose primary business is chemicals and various plastics ending in "ene" and ide," doesn't expect Powerhouse to add greatly to revenues and earnings.

And considering the state of the housing market, I agree. And considering the state of the economy, I doubt that DOW's "enes" and "ides" will give the stock good reason to get off its derriere.

However, DOW's $16 billion purchase of Rhom and Haas last year reduces the company's dependence on cyclical products. And while DOW is the country's largest chemical company, I don't see any notable appreciation in the coming few years.

But sell MSFT and park the money in one of those bank variable loan funds at 3 percent for a while. Cash gives you time to think.


Please address your financial questions to Malcolm Berko, P.O. Box 8303, Largo, FL 33775 or e-mail him at Visit Creators Syndicate Web site at

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Published: Mon, Sep 13, 2010