Dear Mr. Berko: Please tell me what you think of Ralcorp Holdings Inc. I bought 130 shares in May 2007 at $66 and they just keep going down. Do you think I should sell this stock? I also own Goldman Sachs Large Company Growth-B Fund. I bought it eight years ago and my $10,000 invest is worth $8,043. Please tell me what I should do with it. I thought Goldman, Sachs and Co. was a prominent and respected investment firm, which is why I listened to my broker and bought it. What a mistake that was. I also own Alliance Global Fund and Templeton Foreign Fund. Please advise me on these two mutual funds, too. - R.R., Jonesboro, Ark.

Dear R.R.: Four brokerages on Wall Street have a "strong buy" on Ralcorp Holdings Inc. (RAH-$54.51). Last year, RAH was highly regarded by Lehman Bros., JPMorgan Chase & Co., Credit Suisse Group, AG Edwards & Sons Inc. and quite a few other semi-respected stock brokerage firms. Even Bear Stearns Cos. Inc. liked the stock.

RAH is a private-label producer of breakfast cereals, crackers, cookies, snacks, jams, syrups, salad dressing, sauces, frozen griddle products and frozen pre-baked products, and the most darn delectable, delightful, delicious and piquant edibles I've had the pleasure of sampling. They are sold under names like Nutcracker, Carriage House, Bakery Chef, Bremner, Bloomfield and, of course, Ralston Foods.

A large portion of RAH's $2.6 billion in revenues is also derived from products it makes for large grocers under the Kroger, Publix, Safeway or Weiss labels. RAH has had a stellar record of revenue and earnings growth for more than a decade, and earnings for 2008 should come in at $3.40 a share. But profit margins, which were 5.7 percent in 1998, have been trending steadily south to 3.6 percent this year.

However, RAH's recent $2.6 billion purchase of POST cereals should improve operating margins because the synergies were too impossibly good to pass up.

RAH is a small-cap company with 26 million shares outstanding. Its 16 percent return on shareholder's equity is superb, cash flow continues to be strong and long-term debt continues to decline.

I really like RAH. However, rising commodity prices are taking a big bite from margins and packaging costs have risen through the roof. Management has increased prices, which has hurt revenues and there seems to be little relief in sight. While RAH trades at 16 times its value, it is with reluctance that I suggest you sell your 130 shares.

In light of continued rising ingredient costs and limited pricing flexibility I think RAH shares could move lower and see little possibility of any price recovery this year or next. RAH doesn't pay a dividend and a six-month, 4.25 percent certificate of deposit will give you some decent income with absolute safety.

Goldman Sachs Structured Large-Company Growth Fund is a $1.9 billion open-end mistake with a 5 percent deferred sales charge that came public in May 1997. Since coming public this two-star abomination has posted an unforgivable negative 10-year average return of minus-1.08 percent. Heck, a one-eyed, chimpanzee with measles could do a better job than the quartet who manage that blithering slop.

Since the initial public offering, Goldman Sachs euchred nearly $2,000 of management costs from thousands of fools who got suckered by the magic Goldman name and invested $10,000. I used to know Guy Levy, the past senior partner of Goldman and enjoyed visits with Gus and his wife at their New York penthouse during the late 1960s and early '70s. Gus had many friends because his business ethics were honorable; he was kind and cared for his people and Goldman's clients. In fact I believe Gus would have refunded every penny of those management fees to investors with his personal apology.

Gus measured Goldman's success by its contributions to the world community, not by the size of its bank accounts. That's not the Goldman Sachs culture now. If Gus were alive today he'd turn over in his grave.

Goldman is well known for three things. They are bloodthirsty remorseless traders who have made billions trading oil futures. They are ruthless arbitrageurs and grinding investment bankers with tremendous powers of persuasion. They follow the Goldman Sachs mantra, which is simply: "Money Is the Only Measure of Success."

Goldman's equity research is about average and their fee-based, individual account management is something to sneeze at. So sell that Goldman mutual fund plus your two foreign funds now. Most foreign funds have posted low, negative, double digit returns this year and might repeat that performance next year and possibly 2010.

Please address your financial questions to Malcolm Berko, P.O. Box 1416, Boca Raton, FL 33429 or e-mail him at malber1@comcast.net. To find out more about Malcolm Berko and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate website at www.creators.com.

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