By Gary Weiss
As manager of Financial Investors, a hedge fund specializing in banking and other financial stocks, Dale Jacobs has a special affinity for stocks that don't generate many headlines and are steady, reliable cash producers. In other words, boring. One such unexciting stock that he has been accumulating is National City (NCC), a Cleveland bank holding company.
The 10th-largest U.S. bank, National City is no slouch. Nevertheless, it has generated little excitement on the Street, despite six quarters of rising profits, fed mainly by its consumer banking operations. Jacobs believes that the company's Big Board-listed stock, now at 28, is a tempting buy. He notes that the company trades at a price-earnings ratio of just 11 on current earnings, yet it generates a return on equity of 20%. Its dividend is 4%, and Jacobs sees it remaining constant. He says National City has a good mix of corporate and retail business, mainly in Ohio but also in Illinois, Indiana, and Michigan. A profitable credit-card-processing operation adds to the bottom line. Jacobs calls National City's management, led by CEO David Daberko, "hands-on, not doing wild things. Solid." In the first half of 2002, net income climbed to $839 million, or $1.36 per diluted share, up from $685 million, or $1.12, the year before. Jacobs sees the stock at 40 in a year. Gene Marcial is on vacation.