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Dear Mr. Berko:

T.T., Everett, Wash.

Dear T.T.:

Value Line Inc. (VALU-$42.30) publishes some of the sweetest research this side and that side of Wall Street. Its Mutual Fund Survey, No-Load Fund Advisor, Options Survey, Convertible Bond Survey, Special Situations Service and various other niche publications are well-written, easy to read, accurately edited and professionally researched. Its popular Investment Survey is on the mark; the numerical data is clearly presented, the company descriptions, outlooks and analyst’s opinions are logical, realistic and concise. And I’d be remiss if I failed to compliment VALU on its superb balance sheet and income statement presentation of the 2,000 companies it smartly covers.

However, VALU’s management really “sphinx.” Jean Bernhard Buttner, the 73-year-old executive chairman, president, chief executive officer and chief operating officer, apparently wants the company to molt, mold and decay with her as she grows older and older and older. And with the exception of VALU’s analysts, I suspect that Jean probably hires people in her image.

Ten years ago, VALU’s revenues were $94 million, earnings were $3.68 a share, the dividend was $1 and cash flow was $3.68 a share. Since then, the company’s revenues slowly deflated to $83 million while earnings and cash flow steadily shrank to $2.48 and $2.39 a share, respectively.

On the balance sheet side, book value crashed 50 percent to $6.90, and $100 million of VALU’s $208 in assets disappeared into the ethers since 1998. Capital expenditures fell by 50 percent in the same time frame, as did VALU’s common to equity ratio. What a lousy way to run a debt-free company that provides subscribers such superb information.

Jean obviously knows bupkis about marketing, which is painfully evident, and the mice who warm her boardroom chairs ought to be exterminated before what’s left of Value Line’s assets gets nibbled away. With the exception of the gorgon who answers the phone, Jean’s administrative employees are a decent sort, but they sound feckless, unsure and give the impression that they’re sitting on thumbtacks.

Management hasn’t even a foggy idea how to promote itself, doesn’t know how to price its products, and has failed to consider changes in its various products to improve content, subscriber appeal, the authority of its recommendations and of course future revenues.

However VALU’s sustainable growth rate is quite close to the rate at which its share earnings have grown. Obviously that’s not good. Unfortunately VALU will have to raise capital from outside sources if its doddering management and its inutile board of dinosaurs wish to grow the company. But if the past is any indication of the future … they don’t. It’s also worth noting that Jean’s salary, not including bonuses, perks and pension, equals a huge 1 percent of revenues. Rather large, that!

I can’t recommend the stock, which has been slipping steadily downward from its high of $74 back in 2005. But I can certainly recommend VALU’s research products, which in my opinion are, at their very worst, much better then the slanted opinions published by Goldman Sachs, Credit Suisse, UBS, Standard & Poor’s, Merrill Lynch, etc. VALU’s research people, unlike the dudes at Merrill, UBS, Goldman Sachs and Citigroup, do not use their reports to stroke egos in order to seek investment banking business from corporate clients. Value Line’s reports are dependably unbiased, and their veracity is unquestionable. It’s shameful that we can’t truthfully say this about the opinions published by the brokerage industry.

No, I haven’t heard a word about a merger. And I seriously doubt that Morningstar Inc. (MORN-$57.73) or TheStreet.com Inc. (TSCM-$8.96) have any interest in this anachronistic company. Considering management’s sorry and intentional past performance, I can’t find a reason to own this issue, so dump the stock.

Please address your financial questions to Malcolm Berko, P.O. Box 1416, Boca Raton, Fla. 33429 or e-mail him at malber@adelphia.net.© Copley News Service