Your Ad Here

Friday, June 19, 2009

Gold, Oil and Monthly Fixed Income? They're All in This CEF (GGN)

My favorite play in the commodities world is no other than the.......That position is the closed-end Gabelli Global Gold, Natural Resources & Income Trust (GGN.)

I have been buying GGN each and every chance I get, at the appropriate entry points in the endless profit machine called the energy cycle, the ADRs of Petroleos Brasileiro SA (PBR), Imperial Oil (IMO -- really a better play on natural gas,) Devon Energy (DVN), and Murphy Oil (MUR) Those, coincidentally, are the largest energy holdings of GGN, along with lesser positions in other old favorites of ours like Chesapeake Energy (CHK), Conoco Phillips (COP), Marathon (MRO), Transocean (RIG) and a whole bunch more. As of the end of March, the fund's most recent quarterly holdings report, those energy and energy service firms comprised 24% of GGN’s portfolio.

Comprising 52% of the remainder are some of our favorites in the metals and mining business. GGN’s largest holdings include Agnico-Eagle (AEM), AngloGold Ashanti (AU), Barrick (ABX), Gold Fields (GFI), Goldcorp (GG), Harmony Gold (HMY), Kinross (KGC), Lihir (LGL), Newmont (NEM), and Yamana (AUY) – as well as lots of others familiar to regular readers.

Add about 10% in T-Bills, 10% in corporate bonds in mining and energy firms, and a smattering of convertibles, and that brings us to nearly 100% of their holdings. But none of that accounts for their outsize dividend payout of 11.92%. That monthly dividend comes from writing calls against many of their positions.

Now if you are an unabashed bull on gold and energy and believe both will move in concert to the upside with nary a pause for breath, you will not want to buy GGN. Many of their written calls will be exercised and the stocks called away before they could participate in such a stampede.

I am reminded of the story you may have heard of the old bull and the young bull walking in the south 40 and sighting a herd of cows grazing in the valley below. “Let’s run on down there and pick one out!” says the young bull. “Son,” says the old bull, “let’s walk on down there and pick them all.”

Fund Info:

The primary investment objective of the Fund is to provide a high level of current income and secondary objective is to seek capital appreciation consistent with the strategy of the fund and the primary objective of the fund. The Fund will attempt to achieve its objectives by investing at least 80% of its assets in equity securities of companies principally engaged in gold and natural resources industries. The Fund may invest at least 25% of its assets in the equity securities of companies principally engaged in the exploration, mining, fabrication, processing and distribution or trading of gold or the financing managing controlling or operating of companies engaged in gold-related activities.

Currently trading at a 8.37% Premium to the nav. With a 12.01% Monthly Dividend. Currently 0.14 cents per month paid since jan 1st of 2007. Expense ration a tad high at 1.69%, but hard to find a paying commodity fund to replace this one with this diversification.

Disclosure I am long GGN shares in my Commodities Folio.

3balls Golf Gifts

1 comment: