Trust This Value Trust

12/31/2004 12:00 am EST


Gordon Pape

Editor and Publisher, The Income Investor and the Internet Wealth Builder

Gordon Pape, editor of Internet Wealth Builder , is the second of our advisors who is sticking with his selection from last year. Royce Value Trust, his favorite last year, has since gained 21%, closing near its annual high. The fund remains his Top Pick for 2005.

"It’s hard to go wrong with Royce Value Trust (RVT NYSE). This closed-end fund, which specializes in small-cap stocks, has been churning out a combination of steady cash flow and capital gains for investors for years. Manager Charles Royce uses a value approach to select his stocks and the fund’s track record is evidence of his skill. Since the fund was launched in 1986, it has produced an average annual return of 12.3%. From 1993 to 2004, it made a profit in every year except 2002.

"For income investors, this fund is just what the doctor ordered as a cure for low interest rates. The distribution record is very strong and in 2004 shareholders received payments totaling $1.55 per unit. Based on a recent price in the $20.50 range, that would translate into a cash yield of about 7.6% if the fund is able to repeat that in 2005. If you’re look for a security that is going to shoot out the lights by doubling in the next 12 months, this isn’t it. But if you want strong cash flow and solid management over the long haul, Royce Value Trust should be in your portfolio."

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