Dear Mr. Berko:

I just got into the stock market but have been reading your column for years. I have a small account (I’m just 29) that has a $47,000 market value, plus I’ve fully funded my Individual Retirement Account and 401(k) with no-load mutual funds, as you always advise.

In my research, I discovered three stocks that I consider compelling. All my research agrees with this conclusion, and in order to be comfortable with my decisions, I thought it best to solicit your advice. The three stocks that my research tools came up with are Primus Guaranty at $14.30, Haverty Furniture at $13 and Monterey Gourmet Foods at $3.10. I would buy 100 shares of Primus, 100 shares of Haverty and 400 shares of Monterey, which I know may be very risky. I’ve worked hard to come up with these beauties and pray you will agree with my conclusions.

T.R., Moline, Ill.

Dear T.R.:

You are an amazing young lady. I like the way you think, I like the way you write and while your analysis profiles are too complicated for my taste, I must say that I’m not the least bit underwhelmed! In fact, I’m willing to wager my Stubbs & Wooten opera slippers (let’s throw in a case of Vin Constance, too) to a dime that you may be independently wealthy by the time you are 51.

Primus Guaranty Ltd. (PRS-$13.24), with just 34 employees, is in the business of selling credit protection that guarantees the payment of loans, credit obligations and financial commitments issued or made by investment-grade corporations. PRS helps banks reduce their loan risks by managing a sophisticated portfolio of credit swaps. PRS went public last year at $15 and ran up to $17. The balance sheet is strong, there are 42 million shares outstanding, book value is $8.41 and PRS has already sold $9 billion in credit guarantees. Standard & Poor’s believes PRS will earn $1 a share this year and right at $1.50 in 2006. This is a keeper. I think earnings could grow 20 percent to 25 percent a year for the next four to six years. Buy it.

Haverty Furniture Cos. Inc. (HVT-$12.62) doesn’t have a Haverty on the payroll, even though this company was founded by J.J. Haverty in Atlanta in 1885. HVT operates 118 stores in 76 cities that cater primarily to middle and upper-middle price ranges. This year HVT expects to sell $835 million in brand names like Broyhill, La-Z-Boy, Bernhart, Lane, Serta, Sealy and a lot of darned good Haverty brands, too. HVT has a superb balance sheet, just $42 million in debt, 23 million shares outstanding and currently trades 73 cents below its $13.35 book value. I like the stock for good, slow, quality growth. Earnings for 2005 may be 90 cents and could ratchet up to $1.12 in 2006. In my opinion HVT may have above-average three- to five-year growth. So buy it!

Monterey Gourmet Foods Inc. (PSTA-$3.61) makes and sells refrigerated gourmet sauces and pastas to restaurants and grocery stores. The company produces more than 250 varieties of gourmet foods, salsas, dips, gnocchi, pasta, soups, hummus and polenta. It also sells refrigerated gourmet entries like seafood, lasagnas, grilled wrap sandwiches and pasta primavera. I personally know that PSTA’s dishes are delectable, toothsome, gustable, sapid and finger-lickin’ good, too. And you can buy PSTA products at more than 9,500 grocery stores in the United States. Last year PSTA had a record $62.5 million in sales and lost about 8 cents a share in the process. The year before (2003), PSTA made 7 cents, and in 2002 PSTA earned 76 cents. The earnings record looks a little weak; however, some observers believe that revenues and earnings growth will be compelling for the next three to five years. According to Standard & Poor’s, PSTA’s share price is $1.31 more than its $2.30 book value. There are 14.5 million shares out, and in the past couple of years, management has made two good investments, one in Sonoma Cheese and the other in Casual Gourmet Foods. I believe other investments/acquisitions may take place, and I think the shares have the potential to move up to the $10 range in a couple of years. Buy it, too!

Meanwhile, if you get any more good thoughts, please send them on, ’cause we’re always searching, searching and searching for new ideas like these three.

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

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