This “Billionaire’s Secret” Lets You Buy Stocks For 19% Off

| March 21, 2018 | 0 Comments

One of the greatest things about closed-end funds (CEFs) is that they often cost less than they’re really worth.

And no, I’m not basing that on some obscure metric—I’m literally talking about the difference between the market price of the assets the fund owns and the market price of the fund itself.

It works like this: a CEF can trade for, say, $9.90, even though all the assets the fund holds (known as the net asset value, or NAV) are worth $10. Believe it or not, this happens a lot—it’s exactly how billionaire investors make big money in CEFs.

Take, for instance, Boaz Weinstein of Saba Capital Management. He’s a pretty big name on Wall Street for one reason: he was the guy who took down the so-called “London Whale,” a reckless trader with JPMorgan Chase & Co. (JPM) who racked up $6 billion in losses on phenomenally dumb bets.

Weinstein was the guy on the other side of those bets.

And now Weinstein has another lopsided Wall Street mistake in his crosshairs, and it has everything to do with closed-end funds.

As I told you last year, Weinstein stated that he was betting big on CEFs, spotting an opportunity to buy these funds, which were heavily discounted at the time, and waiting for the market to clue in to the big profits they offered.

Here’s how our CEF Insider equity indexes have done since Weinstein’s big bet:

A Steady Profit

Source: CEF Insider

Even after the recent volatility, these funds are up around 15% from a year ago. The best news is that there are still a lot of discounted CEFs floating around, despite this gain, so if you want to get in on the action, you’re not too late.

Which brings me to the 2 CEFs I’ll show you now.

2 CEFs Selling for Up to 19% Off

Let’s start with the Eagle Growth & Income Opportunities Fund (EGIF), which is a tiny, $111.5-million fund trading at a huge 16.8% discount to NAV. If you think this is because EGIF is holding dangerous stuff, think again; many holdings are value stocks with strong cash flows, like AT&T (T), Phillip Morris (PM) and Cisco Systems (CSCO).

Buy these stocks on the open market or hold them through a value-stock mutual fund or ETF and you’ll get $100 worth of stocks for every $100 you put in.

But with EGIF, you’ll get $100 of stocks for $83.20, thanks to that absurd discount to NAV.

Why else should you consider EGIF now?

Simply put, its discount has gotten a lot bigger thanks to the recent market volatility:

Cheap Fund Gets Cheaper

Eagle Growth & Income Opportunities Fund

So if you were to buy now and wait for the fund to trade at par, you’d be looking at a 20% return. Or if you’re more impatient, just wait for this CEF to go back to where it was less than a year ago. You’ll still get a nice 5.6% return. And while you wait, you can enjoy EGIF’s 5.6% dividend stream.

A second fund to consider is the GDL Fund (GDL), run by famed value investor Mario Gabelli. Mario is a seasoned Wall Street billionaire not unlike Warren Buffet; using time-tested value-investing principles, his team looks for discounted stocks around the world and bets big on them.

But despite all that expertise, GDL trades at a ridiculous 18.6% discount to NAV!

GDL’s Absurd Markdown

GDL Fund

The bottom line?

With $81.40 you’ll get $100 worth of stocks in high-quality global companies like Time Warner (TWX), which is likely to pop soon when it merges with AT&T, as well as Parmalat (PLT), the Italian dairy producer, which has a large share of the EU market, and Advanced Accelerator Applications (AAAP), which drug-making giant Novartis (NVS) is seeking to acquire.

Obviously, Gabelli’s team knows their stuff.

Buying now would get you this value portfolio at a huge discount. Wait for its discount to revert to where it was a few months ago, and you’ve got 8.1% upside. Keep holding on and collecting the 4.2% dividend stream and you’ll likely rack up even more gains, thanks to GDL’s strong and underappreciated portfolio.

 

My Top 7 Buys to DOUBLE Your Nest Egg Fast

It’s a proven fact: buying stocks with fast-growing dividends is the key to building lasting wealth in all markets.

So it’s obvious that the faster your stocks hike their payouts—while not overstretching themselves, of course—the better off you’ll be.

That’s why, just a few weeks ago, I gave my research team one mission: find the strongest (and safest) dividend growers out there, with one goal in mind: to lock down a 12% annual return for life.

Here’s a sneak peek at just 3 of the 7 companies they turned up. (I’ll give you the complete list of names when you click here.)

  • The US company that’s cashing in on surging Chinese water demand. This water-heater maker is even more boring than Ecolab! But its dividend hikes are anything but: the payout has soared 157% in just 4 years! And there are far bigger hikes to come!
  • The 800% Dividend Grower. This unsung company has boosted its dividend eightfold since a new management team took over just 5 years ago! This stock is a complete no-brainer for anyone looking to get bigger and bigger dividend checks from here out.
  • A “double threat” income-and-growth stock that rose more than 250% the last time it was anywhere near as cheap as it is now!

I’m ready to give you everything you need to know about these 7 bargain-priced “dividend accelerators” now. Simply CLICK HERE for instant access to their names, ticker symbols, buy-under prices and much more.

 

Tags: , , , , , ,

Category: Closed-End Funds (CEFs)

About the Author ()

Michael Foster is an Investment Strategist at Contrarian Outlook.

Please Leave a Comment