Convertible analyst Berkman identifies safe harbors in choppy market seas

By Evan Weinberger

New York, July 25 - The right kind of convertible can provide a safe haven for investors looking to ride out jittery equity markets, according to a report released Wednesday by a long-time convertibles analyst.

Paul Berkman, the senior vice president for convertible research at J Giordano Securities Group, says that a thin slice of the convertibles universe will allow investors to protect themselves against a stock sell off, while keeping them in the market just in case there's a quick rise in share values.

"So what I'm looking for here is a way to sort of have your cake and eat it too," Berkman said in an interview. "You can look like a star in down market doing this."

The specific traits to look out for are laid out in "Convertibles for a Nervous Market." The convertibles Berkman recommends have a maturity or put date within three years and call protection for at least one year. The convertibles should trade under 110 and have a yield advantage over the underlying common stock. And the issue size should be at least $100 million, Berkman counsels.

The report provides several convertible issues for investors to look at in the coming days. Among the convertibles are Affymetrix Inc.'s $120 million 0.75% convertible senior notes due 2033 at the small end and St. Jude Medical Inc.'s $1.2 billion of 1.22% convertible senior debentures due 2008.

Affymetrix's convertibles have a put date coming up on Dec. 15, 2008 and were trading, at the report's press time, at 102.07. The call date is the same as the put date.

The St. Jude's debentures are due Dec. 15, 2008 and are trading around 102.9, the report says.

While investors and managers hate the idea of losing money in a bear market, there is one thing they hate more. "I think an even greater fear is of not being in when it goes up," Berkman said.

Following the guidelines set out in the report, Berkman believes, may just protect investors from both eventualities.

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