Farmers & Merchant Bank of Long Beach (OTC BB: FMBL) - $6,650

I have an affinity for closely-held, thinly traded companies that are heavily owned, operated, and controlled by a single family - especially if there is a long history involved. This is no secret per my Seaboard Corp (AMEX: SEB) and Ash Grove Cement (Pink Sheets: ASHG) holdings which are 80% owned and controlled by the Bresky Family and the Sunderland Family, respectively. Additionally, SEB's formation dates back to 1918 when the Bresky's acquired their first flour mill and ASHG which has an even longer history, going back to 1882. I have also recently taken an interest in J.G. Boswell (Pink Sheets: BWEL) which was started in the 1930s and today is still family controlled and operated. Another good example of Crowley Maritime (Pink Sheets: CWLM). I recently missed the boat on this one - it last traded at $1,805 and several weeks ago, the family conducted a going private transaction at around $2,990 - a 65% premium on a stock that has performed rather well over the years.

Before I delve into FMBL, I will tell you why I like the general set up I described above. First, since they do not trade much, you can get a really good feel for how the stock moves on any form of volume. Watching the bid/ask spread change, basically in slow motion, is a fantastic learning experience and you can really get some insight as to what is going on in the marketplace from a supply/demand standpoint.

Next, the family typically has no reason to sell their shares and more often than not, sales do not happen. Whether it is family pride or a general contentment, the deals are typically structured to provide generous salaries and a fair dividend payout that does not empty the company's coffers, but provides a very generous stream of income. For instance, ASHG founding family takes approximately $12M-$14M of dividends each year. SEB's founding family officer receives a $1.5M salary and about $2.5M of dividends each year. BWEL - well, no idea. Anyway, back to the point about not selling, this removes a lot of the downward, selling pressure from the market. Compare to some companies where executives dump their shares as soon as they receive them.

Finally, the founding family typically acts like owners. Obviously, while the founding family is the primary beneficiary and receives the overwhelming lion's share of the spoils, as a shareholder, you are entitled to a small sliver of that pie. In short, you might as well jump on the bandwagon and share in the success that has been good to their families. You typically see less, if any, dilutive stock grants or options. Stock splits are not common. In short, they are the owners and are glad to have new ones, but you have to pay the fiddler. They seem to have an understanding of the exclusivity of ownership and if that practice is apparent in a family owned/controlled company, shareholders are typically rewarded over the long term.

Of course, anything can happen. Take the Adelphia mess where the founding family basically treated the company's bank account as their own personal allowance. Fraud can happen, yes. But, really, for many of these companies, there is no reason to do so. Fraud would actually be easier to indicte and track down in these family owned companies than it would in a company like Cablevision or Adelphia where there is a significant base of shareholders. Basically, when things are simpler, it is just not as easy to hide wrong-doing and concisely, there is less reason to commit such.

Without sounding too supernatural, finding companies like this is almost like a loophole in the system. I am unsure why they are public in the first place and many do not talk about it - or even make reference to not being public. Yet, they have stock symbols so anyone can purchase shares, but more often than not, people don't.

Anyway, onto Farmers & Merchant Bank of Long Beach (FMBL).

FMBL is a business bank with 20 branches in Long Beach and Orange Counties in Southern California. The bank has been established since 1907 and have over 500 employees. The company is controlled, owned, and operated by the Walker Family. The bank itself has an interesting history and founding story which can be read at their web site at www.fmb.com.

First, it is important to note that FMBL is primarily a business bank. Business banks have been somewhat shielded from the subprime lending meltdown and have actually faired very well over the past few years. Yes, FMBL offers personal banking services, but they focus on the commercial banking aspect.

FMBL has 151,000 or so shares outstanding, with the bulk of them being owned by the Walker Family. I am unsure of how many exactly they own, as I cannot locate any SEC filings, but I assume it is 70%, at the absolute minimum. The stock is off from its relatively recent $7,095 all-time high and is up from its $5,700 52-week low. The stock has increased nearly 4-fold over the past 7 years and has more than doubled since 2003. FMBL also pays $20/quarter dividend, which is about a 1.2% yield.

FMBL is certainly not a stock that is going to move very quickly, but it should be a solid investment and I feel it is worth closer to $12,000 per share. I am hesitant to put that price target on it as the nature of the family controlling the bulk of the shares in a pretty much "I'm not for sale" attitude will likely prohibit FMBL shares reaching a full market valuation. I get that $12,000 price target by looking at FMBL's price to book ratio of 1.6. The best comparison I can offer is/was Business Bank of Nevada that traded on the OTC BB under the symbol BBNV before being acquired for about 3x book value. BBNV was obviously for sale, but it is important to know that FMBL is larger and more established and appears to be cheaper when you look at the various ratios, even pre-acquisition.

FMBL banking ratings are pristine with maxxed out high ratings, among others, from the IDC (300 on a scale of 0-300), A+ from Weiss Ratings, 5-Stars from Bauer Financial, and a 91/99 from Highline Data. You will be hard pressed to find a bank that is as of high of a quality as FMBL is. Many banks somewhat preclude themselves from achieving as high of marks due to the nature of their operations - it is not that they are bad by any means, but bigger banks cannot be selective.

FMBL continues to generate lots of shareholders equity on a consistent basis and by in large, and as FMBL improves their shareholders equity and book value, FMBL becomes cheaper by the day, as long as the stock stays where it is at.

FMBL will likely not reach $12,000 per share, at least not anytime soon, but I expect, realistically, we will see a $9,000 stock sometime in the next 3-5 years. This is certainly one that requires patience and is not going to be the biggest winner you have ever seen, but it appears to be a very shareholder-friendly, limited downside place to stock some of your cash.

National Bank of Greece (NYSE: NBG) - Time To Sell? Only For the Weak Minded...

Today, NBG closed down 2.1% and finished the day at $11.42. It actually opened much lower at $11.30 and climbed back to $11.50 late in the day before some late selling brought it down to $11.42.

The cause? It was reported that Abdullah Gul of Turkey won the first round of the Turkish Presidential elections. Gul is from the Islamist Party in Turkey and that caused a great deal of political turmoil and concern, especially since Turkey has prospered primarily as a Secularist state. A good example of this is Gul's wife wears the traditional Muslim attire, which is banned in many places in Turkey. There was concern not only of this political change, but that Turkey's Army would come into play, as they have several times in the past, to maintain the Secularist control. This entire activity put the Turkish stock markets into an 8% dive and their currency into a 4% nosedive.

For NBG, this seems to be critical considering that they are counting on their acquisition in Turkey to help fuel their growth. Couple this with the NBG announcement that they will be selling up to 583,000 treasury shares of stock, and looks like an immediate sell, right?

First, let's look at the 583,000 share issuance. Dilution is never a great thing, but this issuance represents about 0.1% of the shares outstanding. This is not a big dilution at all - I bet there are more stock grants and options that are issued than that on an annual basis. Additionally, NBG said they will not sell the shares for less than 42.6 Euros, which equates to $11.67 per ADR when you take the currency exchange rate into effect. Yes, companies typically do not sell shares unless they feel they are overvalued, but I think this new issuance is not very dilutive. It may not be great news, but it certainly is not bad news.

Next, the more important event, the situation in Turkey. First, it is important to recognize that stock markets always tend to over-react to geo-political events. Take the recent 8% spike in oil prices during a 5 minute period when a rumor of a US/Iran military engagement came to light. There may be problems in Turkey, but the market has over-reacted to them. Barring some other form of geo-political disaster tomorrow, we should see an upward correction in the Turkish markets and NBG.

Also, the events in Turkey are not too surprising. The country's parliament, that directly elects the President is predominantly represented by the Islamist party. It should come as no surprise that this, at the very least, was not out of the realm of possibility when NBG decided to make a big investment in the country. In short, it may not be the best news for NBG (I am not convinced of this), but NBG likely had intelligent analysts, economists, and geo-political experts outlining various risk scenarios and possibilities. In short, it appears this event has been coming for a while, so it should not come as any surprise.

Gul has also expressed nothing but a desire for 'business as usual' in Turkey and his political career has shown that this is likely the case. Things might get more dramatic if the Turkish Army gets involved and tries to stop the transition, but that is unlikely. The Turkish Prime Minister has spoken the desire and demand to have unity during this time. Additionally, Gul is not an idiot - he knows what Turkey is and would be foolish to change things, especially since Turkey has prospered tremendously the past few years. I do not see that changing. Even if Gul does move towards something more Islamist in nature, it pleases Allah for Muslims to prosper in business and accumulate wealth.

One final element - tomorrow is a Labor Day holiday for much of the world and trading activity today for NBG and the rest of the markets was relatively thin and light. There is likely not enough downward pressure to sustain today's drop.

Long story short, the fundamentals for NBG remain strong and nothing situationally has changed and I still see NBG doubling within the next 2-3 years and reaching the mid/high teens by the end of 2007.

Merck (NYSE: MRK) Blows Out The Street

Although Merck (NYSE: MRK) does not officially announce their 1Q 2007 results until April 19, they let the cat out of a bag a little bit today at around 6:30pm. In short, MRK expects better than expected 1Q 2007 results and is raising their EPS guidance for 2007 by about 5% when compared to their original projections. See article at Yahoo! Finance.

MRK was up big-time on the news - up over 3.5% to $48 in after hours trading. I believe we will also see some upgrades on MRK in the coming days, likely to sector outperform or overweight. Apart from their 3.3% dividend yield, which is very nice for a company showing the growth and results they are having, the cards are stacking up nicely for MRK to perhaps reach their all-time high levels of $90+ per share in the coming 3-4 years.

I know it is typically buy on rumor, sell on news, but this might be a little different considering their blow out guidance is well above what anyone expected. I do expect a strong Friday, and likely some profit taking over the next couple of days, but reaching $50 per share is very likely in the coming weeks.

MRK has solid financials and a great drug pipeline, developed both through internal R&D and strategic acquisitions. I am not a huge MRK advocate, as everyone knows about it, but this is a great retirement investment. Even with the recent climb in price, the market is open 9:30am-4:00pm, Monday-Friday - any time within that framework is a good time to buy if you have a 10+ year time horizon.

Also, to continue gloating about the 'expert' saying PFE is a better pick than MRK, well, it's now Terence 2, Experts 0.

FYI, I own PFE as well for myself and my daugthers via their DSPP - same as in MRK - and I believe that PFE will do well in the long term and continue to raise their annual dividend. MRK's success should also spillover some into the PFE realm. PFE was up 1.6% today and up another 0.5% after hours on the MRK news.