Berko on NCC

Malcolm Berko, a syndicated columnist, who writes on money matters, had an article about National City in my own hometown newspaper yesterday (link):

Dear Mr. Berko: I’m retired and thinking about taking a gamble with about $4,000 and buying 700 shares of National City Corp. What do you think of the stock and my idea? I believe the stock will turn around in four to six years and I might be able to triple my money. And if I triple my money in six years while the stock goes from $6 to $18, that’s a 20 percent annual return. — L.P., Des Moines, Iowa

Cutting to the chase:

But because you’re retired, I wouldn’t just buy the stock, I’d also consider the National City Capital Trust IV, 8 percent Preferred stock (NCC-C-$13.26) that has a 16 percent current return. This NCC-C pays in March, June, September and December, is callable at $25 and rated A3/BBB-plus by Moody’s and S&P. I’d suggest investing in 350 shares of the common (about $1,650) plus 100 shares of NCC-C. This creates a synthetic convertible preferred and while you wait five or six years for a potentially attractive recovery you’ll also be getting a 6.8 percent current return on a $3,000 investment.

That's probably not the advice the writer was looking for.