(MONEY Magazine) – In a rambunctious stock market, convertible bonds are especially appealing to conservative investors. A typical convertible can be exchanged at the owner's option for shares of the same company's common stock. If the price of the underlying stock rises, the value of the convertible will too, though it generally lags somewhat. On the other hand, convertibles usually yield three to five percentage points more than the underlying common shares. Thus converts provide much of the safety and income of regular bonds plus some of the growth potential of stock. Over the past five years, while good-quality corporate bonds have paid an average of 12.5%, converts have yielded 7.8% -- a spread of 4.7 percentage points. Mark Hunt, the editor of the weekly newsletter Value Line Convertibles (711 Third Ave., New York, N.Y. 10017; $350 a year), notes that this spread has recently narrowed to only 2.4 percentage points. ''Convertible bond issuers feel that they have to keep yields up to attract investors,'' Hunt notes. ''People looking for income should take advantage of this narrow spread while it lasts.'' Hunt finds the following three issues, all of which are unlikely to be called any time soon, particularly attractive. (When a convertible bond is called, its holders are forced to convert their bonds into common shares, often at a small loss.) Bindley Western Industries 8.625s, due in 2010 (recently traded over the counter at $1,190, 6.9% yield to maturity). One of America's largest drug wholesalers, Bindley has delivered average annual earnings growth of 22% over the past five years by selling to several large drugstore chains, including Jack Eckerd, Kroger and Rite-Aid.

DBA Systems 8.25s, due in 2010 (OTC, $1,190, 6.6% yield to maturity). By filling special niches in the defense electronics market, DBA has produced < higher earnings for each of the past eight years. Value Line Investment Survey -- the stock rating service -- predicts that DBA's profits will rise from $1.07 in 1986 to $1.15 this year. Oakwood Homes 7.5s, due in 2001 (ASE, $1,015, 7.4% yield to maturity). This mobile-home builder, based in North Carolina, has increased its profits every year since 1975, and Value Line is looking for another 8% gain this year. Earnings should get a lift from Oakwood's new finance subsidiary, which lends to mobile-home buyers.

Correction: Last month's Wall Street Letter incorrectly stated the assets of Credit Commercial de France. The correct figure is $30 billion.