Top Trio for Closed-End, Global Yields

08/06/2015 9:00 am EST

Focus: FUNDS

Briton Ryle

Editor, The Wealth Advisory

Closed-end funds are usually focused on providing dividends and they employ various strategies to do this. They may own municipal or corporate bonds REITs or other classes of dividend stocks, explains Briton Ryle, editor of The Wealth Advisory.

Some will even use leverage to generate consistent cash returns to pay to investors as dividends. Finally, management fees for CEFs are usually much lower than for actively managed mutual funds.

Alpine Global Premier Property (AWP) gives us exposure to the US and Brazilian real estate markets. These two countries account for 49% of the fund’s $763 million in assets.

From Brazil, it holds Multiplan Empreendimentos Imobiliarios and Iguatemi Empresa de Shopping Centers, both of which are involved in the planning, development, and management of shopping centers.

Its biggest US holdings are Simon Property Group (SPG), American Capital Agency (AGNC), Colony Financial (CLNY), and Invesco Mortgage Capital (IVR).

Net asset value (NAV) is $7.58 and the discount to NAV is 14%. That’s a relatively large discount for this fund, which suggests it’s cheap at current levels. We rate the AWP a strong buy at current levels. Our target is $11.

BlackRock Global Opportunities Fund (BOE) is a leveraged fund. The manager sells individual stock options on the fund’s holdings to generate income.

Currently, approximately 50% of the fund’s holdings are leveraged. While this may sound like a risky strategy, what we’re really talking about is selling covered calls puts. The dividend stands at 8.5%.

Some 78% of the fund is invested in large- and mega-cap stocks and 43% of its holdings are in the US. Its largest allocation is to financials, representing 21% of assets; IT, consumer staples, and consumer discretionary each carry 11% allocations.

NAV currently sits at $15.57. The discount to NAV for these shares has grown to 11%, above its average. The 52-week low for the NAV discount was 13%. I rate this fund a buy and the 12-month target is $18 a share.

We believe the Mexico Fund (MXF) is it is a good long-term holding. Mexico is the best emerging market for investment in my opinion. Its proximity to the US puts it in a strong position.

This fund also pays a healthy 10% dividend. The current NAV for the Mexico Fund sits at $21.60. The 52-week high NAV for the shares was $29.

The shares now trade at a 3.4% discount to NAV. The potential upside makes them attractive. The Mexico Fund is a buy under $34.

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