Replies to post #28665 on A.I.M. Users Bulletin Board (AIMUSERS)

[Toofuzzy]

Hi Rick

I haven't looked but what you are describing sounds like a leveraged fund.

Just remember leverage is what got all the banks and investment companies in trouble. It is nice when the market goes up but really hurts when the market is going down (hence the 20% yield)

You don't need to maximize your returns. You just need reasonable consistent returns. There are plenty of ETF utility funds that are NOT leveraged. They will have reasonable more sustainable yields.

Leverage is a double edged sword.

Just my thoughts

Not always
Toofuzzy

[OldAIMGuy]

Hi Rick, Re: Closed End Fund Discounts to NAV.........

Those discounts on CEFs are rather nice right now. I've talked to a few fund companies about their products, NAV and yields. In one case about 1/3 of the current yield is derived from the "leveraged" side of the account and that might be tough to re-finance going forward. If that were the case, then we'd see the dividend drop by about 1/3 also.

Of course that all assumes that the rest of the dividend is secure.

Best regards, Tom

[AIMster]

I was looking at etf connect and saw a number of funds with large discounts to nav; I was wondering how people feel about aiming something like UTF ;a utility fund...

Well, in ordinary times it might be fine. But since these are anything but, I'd be wary of playing what might as well be termed a sector fund. If you're looking for something with reasonable discount to the NAV as well as low expenses, and something that hopefully will be here for the duration, you might want to take a look at ADX, "Adams Express Company." They started in October of 1929 and the fact that they're still here says something! Though their yield is modest, at 2.43%, they trade at a 16.02% discount to NAV with a very favorable expense rate of 0.46%!



and major holdings are rather large, hopefully reasonably stable names like:

 
 As of 06/30/2008 
 Holding	                      Dollar Value     % of Total Portfolio 
 Petroleum & Resources Corp   $95,321,000.00	8 
 Schlumberger Ltd.	     $40,823,000.00	3.4 
 General Electric Co.	     $37,046,000.00	3.1 
 Microsoft Corp.              $32,462,000.00	2.7 
 ConocoPhillips	             $27,845,000.00	2.4 
 Oracle Corp.	             $23,100,000.00	2 
 PepsiCo, Inc.	             $22,892,000.00	1.9 
 Air Products & Chemicals     $22,738,000.00	1.9 
 Unilever plc ADR	     $22,728,000.00	1.9 
 Procter & Gamble Co.	     $20,675,000.00	1.7 
 

Not a recommendation, of course, but one to consider. ETFconnect's sortation filter allows you to screen out leveraged funds. I would look at those not at too far an extreme either discount or overly generous dividend yield. Expense ratio should be moderate as well.

Happy hunting!

Best,

AIMster

P.S. Source Capital SOR might be another interesting contenda!