Dear Mr. Berko:

A business associate wrote to ask you about Vonage before it came out, telling you that he was offered 1,000 shares and asking your opinion. He showed me your two-word response that said in capital letters “ABSOLUTELY NOT.” He didn’t buy it, but I did, and I’m down by $7,000. How could you be so certain? What did you know that others don’t?

Now my next question. Can you please give me your opinion on two stocks, Municipal Mortgage Co. and Hartford Insurance? I would like your long-term opinion on each to buy for my growth and income account.

M.M., Elkhart, Ind.

Dear M.M.:

Vonage Holdings Corp. (VG-$7.09) was an easy decision. Its chairman and founder, Jeffrey Citron, engaged in fraudulent trading activity. That is the first important reason I wouldn’t touch the stock.

Back in 1993, when this lad was 23, he developed an elegant trading scheme involving the Nasdaq’s Small Order Execution System to rip off hundreds of thousands of small investors who bought and sold over-the-counter stocks. The scheme was so brilliantly coordinated that Citron and his pals were able to skim almost $1 billion from folks like you and me until the Securities and Exchange Commission finally put him out of business nine years later.

But Citron’s huge bankroll kept him out of the Federal Hotel, while he and his cronies paid a niggling $70 million in fines and generously spread some largesse among a few politically connected sleazeballs. My father used to tell me, “A man can always change what he is but never who he is.” I CAN believe that Citicorp/Smith Barney would do business with a man like that.

Municipal Mortgage & Equity LLC (MMA-$27.30) provides debt and equity financing to developers of multifamily housing by investing in tax-free bonds issued through state and local governments to finance their developments. MMA owns equity positions in real estate partnerships, tax-exempt bonds secured by student housing, assisted-living facilities and community infrastructure improvements.

Better-known as MuniMae, MMA should benefit by rising interest rates. As the difference between the interest on tax-exempt and taxable bonds increases, lower-yielding tax-exempt offerings become more attractive to developers. MMA has a fine record in the industry and enjoys good working relationships with developers throughout the country.

Since going public in 1995, MMA has increased its dividend every year from 56 cents in 1996 to $2.01 so far in 2006. Though earnings don’t always support the dividend, MMA has a strong free cash flow that provides a good margin of safety. Earnings this year are expected to come in at $2.56 per share, and Standard & Poor’s reckons that 2007 earnings could exceed $2.68. MMA has a B-plus rating, the stock trades between $23 and $28 and, as you know, some 85 percent of the dividend is really tax-free, so your basis is not reduced. I think MMA is a super addition to your growth and income portfolio.

Citigroup is the only major Big Board firm that has a published opinion on Hartford Financial Services Group Inc. (HIG-$84.84), more fondly known as The Hartford. And Citigroup rates HIG as a “buy.” Standard & Poor’s has a “strong buy” recommendation, gives HIG its coveted five-star ranking and tells us that record per-share earnings of $7.44 this year will be followed by record earnings of $8.80 next year and record earnings of $9.65 in 2008.

Though its headquarters in Hartford, Conn., are somewhat Soviet in appearance, this multiline insurer seems to have the excitement of a well-oiled, aggressive, “things-get-done” growth company. It’s a well-managed franchise with numerous positive catalysts: improved pricing in property and casualty lines, continued strong demand for retirement products, favorable trends in its life business, impressive growth in fee-based revenues, remarkable growth in its Japanese franchise, a deterioration in claim trends, increasing interest/investment income and solid growth in its mutual fund business.

HIG is just a classy company with $270 billion in revenues and its $1.60 dividend, which may be increased rather nicely once again, yields 1.9 percent. Value Line thinks HIG could trade between $160 and $175 a share in the coming five years, and I unconditionally will not disagree.

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