January 29, 2006
When You Fly in First Class, It’s Easy to Forget the Dots
By BEN STEIN
ONE of the best conspiracy movies ever made is the perfect British classic, "The Third Man." In the most haunting scene, the villain, played adroitly by Orson Welles, takes Joseph Cotten, the good guy, up in a Ferris wheel. The villain, named Harry Lime, has been selling adulterated penicillin in postwar Vienna, making a fortune and causing children to become paralyzed and die.
Mr. Cotten’s character, a pulp fiction writer named Holly Martins, asks him how he could do such an evil thing for money. The two men are at the top of the Ferris wheel, and the people below them look like tiny dots. Mr. Welles’s villain looks down and says, "Tell me, would you really feel any pity if one of those dots stopped moving forever? If I offered you £20,000 for every dot that stopped, would you really, old man, tell me to keep my money, or would you calculate how many dots you could afford to spare?"
This scene comes to mind when I think of Glenn F. Tilton and other executives of the UAL Corporation and the hapless employees of its primary business, United Airlines. Its history is a perfect text for the ethical morass in which American business often finds itself.
After a weak performance in 2005, Verizon (VZ) is a stock of interest for 2006. Basically I see VZ as a nice GARP (growth at a reasonable price) stock with a 5% dividend yield and upside potential driven by new products and services and a re-evaluation by the market. Growth: Benchmark-setting subscriber metrics (high growth, low churn, good ARPU). Margins: 19% operating margins. Valuation: 1.7 Revenue/EV and 12.2 forward P/E. New products and services: fiber to home, content delivery, and bundled services. Current income: 5% dividend yield. Sentiment: Potential for perception/sentiment shift as people begin to see VZ in a new light. See this link for yesterday’s earnings report. Cheers!