Closed-end Fund Income Investing

Quote from Hamlet:

How much of a discount do you expect in the reits? 16% seems like a pretty high discount. DVM is not 100% reit by the way.

I've only been involved with CEFs for about a year, but I came to the same conlcusion as you, that year-end tax selling on "losing" positions is advantagous to some (the loss already made up for by the low-tax rate dividend) and is having an impact on prices. I'd expect to see a pop after year-end on some of these which have gotten to what seems like huge discounts (i.e. DVM), but as you pointed out, these funds seem to be largely ignored by most on and off the street, so who knows....
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I'm really just getting into these... I really like the loan participation funds. If long term bond yields keep dropping I think it is only a matter of time before these are "discovered" and go back to premiums. Thereafter, I'm out, thanks!

Two more that are fun:
particularly EVV - go check out this one and tell me its not something else!
and to a lesser extent EVG (foreign exposure worries me there)

I actually think that REITS will suffer not increasing discount, but a hit to NAV. All it will take is Bernake raising rates once after greenspan's already factored in last raise to 4.5 coming up. Maybe they stay the same in discount, but the share price surely will fall in such a circumstance, so I am hanging out until I have a clearer idea of what is going on there.
 
I think future rate hikes will certainly hurt mainly from a leverage point of view since most CEFs are about 25 - 35% leveraged using floating rate preferreds. However over the long-run I think commercial REITS should do well as the economy continues churning since most commercial office spaces have long-term leases and escalation clauses. Also, a few CEFs I have looked into in this sector have been using SWAPS to hedge rising interest rate risks so overall they will not suffer as much as the price action is implying.

I would not load an entire portfolio with these CEFs but certainly picking a few good ones will add nice yield to your portfolio. If you diversify the different CEFs well, then that diversification will almost take out all share price risk and lock in that nice yield. I mentioned one commercial REIT I liked above in a previous post and still on the hunt for more as well as in other sectors.

One area that I will look into further is short-term muni funds, preferably insured, and some preferred stock funds with an eye to a positive 2006 for the market.
 
I am seeing some amazing acceleration in the stretching of discounts in a lot of these this week. Is anyone doing any bargain shopping here?
 
I will be doing a lot of study this week to look for some good pick ups for the end of the year and into January. I have a lot of cash sitting idle after closing out some posiitons and I want to dump them into CEFs so I will be looking hard and will share my initial findings for discussion. I think some deep discounts may present a good buy as long as there are not deep fundamental problems with the fund or its assets.
 
+ JPS @ 12.50

Closing NAV (12/21): $14.85
Share Price: $12.50
Premium/(Discount): -15.8%
Current Market Yield: 8.9%

Nav 'only' up 4% this year. I'll take that yield, thanks. Beats a pissy 5.10% on corporate 10 year, even after taxes.

Some insider buying in related nuveen preferred/convertible funds like JHP, JQC.
 
Looked at JPS and it doesnt look good. Since 2003 the price has dropped from over 16 to under 13 now and the dividends have dropped too. Would not recommend it.
 
Dropping dividends in a fund with NAV decrease isn't such a bad thing. It avoids eating into NAV. Everything is relative you know - if I had paid $16 for JPS at a premium and now sold it at 12.50 I'd be ticked.

However, note that JPS fell from 16 to high 12's at that time and went only to a max 7% discount. Discount currently is much more attractive.

Again, it depends on where and why you buy. Are you a value investor or a momentum investor? Are you satisfied with a 9% yield or do you want more? Are you willing to take that yield for a while and sell out when market preferences change?

I'm sticking to my guns. Time will tell.
 
I have not gotten in anything yet this week but I do have a chunk of cash being freed up and I am looking to roll into some CEFs this week. Will post some candidates to see which might be the best ones to grab.
 
the closed end funds i follow/trade are moving up this week correcting the big discount to nav. might be time to look at some of these. looks like some of the selloff last year may have been just tax loss selling.
 
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