E Closed-End Funds And Stocks

Note that this kind of discount shopping is distinctly different from a company buying back its own shares because they are undervalued, as Royal Dutch Shell has done because the beneficiaries are not the shareholders but an outside outfit.

*The information gap is extremely unfair to retail investors who are stalwarts in owning closed-end funds. A lack of information on pricing and value has given an edge to institutions—probably not confined to Wells Fargo which I stumbled upon doing my Sunday tables because it also bought ~20% of Japan Smaller Capitalization Fund, JOF.

JOF closed out its FY in August 2018 with a 9.6% loss in net asset value and a 12.8% loss in market price. It paid us $21/sh in short term gains, $140.41 in long term gains, and $9.26 in non-qualified dividends.

*The manager informally revealed that Eaton Vance Tax-Managed Global Diversified Equity Income Fund (EXG) in December continued its practice of paying most of the dividend, 93.2%, in the form of return of capital, which is not taxed until the shares are sold as they cut the basis for capital gains. The investment income was only 6.8%.

*We still own the combined funds of Advent Claymore Convertible Securities & Income Fund (AVKdespite the fund now being mostly domestic. While it can go international at will, it was only 22.1% international at the end of its FY last Oct, but up from 13% a year earlier. The funds were combined last March to cut expenses and overhead.

It is about 50% in convertible bonds, preferreds, and mandatory cv's, with the rest in corporate bonds, equities, senior floating notes, and cash. While the indexes did okay in the year to October 31, the fund was held back by its borrowing costs which were higher than the asset class returns. The asset manager is Tracy V. Maitland, one of the rare African Americans in this business, and the fund is part of Guggenheim Partners which has about $9 bn under management, not only CEFs. It paid out 10.1% with monthly dividends and it mostly makes money by writing calls on what it holds, plus leverage. It lost 5.22% in market price and 0.34% in NAV in its first period as a combined fund, and it closed FY 2017-18 in October at an 8.17% discount from NAV of $17.63.

*Fibra Uno is volatile as the outlook for Mexico is uncertain. Today it rose 2.55% to 24.26 in Mexico, still near the low for the REIT of 20.23. In fact, FBASF's tenants are majority dollar companies so it should do better if the Mexican outlook dims.

*Asia Pacific Income Fund, FAX in the same period to October 31 lost 7.3% in NAV and 14.3% in market price and was discounted 14.4%. It also uses leverage to lock in attractive borrowing costs for diversifying its holdings.


*As I keep warning you all, Banco Santander (SAN) will redeem its non-cumulative preferred shares soon. It is also closing 140 branches in Britain and moving them to digital banking.

*Grupo Financiero Scotiabank will pay back the entirety of its bond issued last Feb. at the end of this month. The Mexican sub of Bank of Nova Scotia could have waited till August to repay the US$51.61 mn issue quoted on the Mexican Bolsa, but didn't wait. Eduardo Garcia reported this in Sentido Comun.

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