Tag Archives: gamco-global-gold

Summary The discounts at GGN and GNT have booth narrowed since I highlighted them. If you were looking for a quick gain, it might make sense to take or at least look at taking profits. With recent history as a guide, however, there could be a little more narrowing to go. I wrote articles about GAMCO Global Gold, Natural Resources & Income Trust (NYSEMKT: GGN ) and GAMCO Natural Resources, Gold & Income Trust (NYSE: GNT ) earlier this month, highlighting an opportunity to take advantage of discounts that appeared likely to narrow. That’s started to happen. If you were looking for a quick gain, now is the time start thinking about a sale. This pair of closed-end funds, or CEFs, from Gabelli invest in exactly what their names suggest, precious metals and other natural resources. The big difference is that Natural Resources, Gold & Income Trust has a broader mandate, so it includes specialty chemicals, agriculture, and machinery. That makes it a little more diversified, though not by much. In addition, Global Gold, Natural Resources & Income makes use of leverage, something that its sibling does not do. Both CEFs use options to generate income, their main goal. The quickie When I wrote about GGN and GNT on the seventh and eighth of January, respectively, their discounts were roughly 5% and 6%. At the close of trading on the 21st, those discounts had narrowed to around 1% for GGN and 4% for GNT. This is in keeping with recent history. Toward the end of the year, this pairs’ discounts have widened only to narrow as the new year progresses. At this point, the price of GGN has increased around 8% and the price of GNT has advanced about 5.5%. There was also a $0.07 per share dividend that I didn’t included in either return figure. On an absolute basis those aren’t numbers to write home about. However, if the goal was a short term trade, that quick bounce happened in about two weeks. Annualized, that’s a great return. If you were looking to benefit from the discount narrowing, you should be thinking about selling. That said, there could be a little more upside. Based on the price performance of GGN over the last 18 months, it looks like a 3% premium would be a good selling point. Selling GNT when the discount narrows to zero looks about the right point for that CEF. Clearly, I can’t guarantee that either fund will get to those points, but that’s what a rough average of the three narrowest discounts (or widest premiums, as the case may be) over the past year and half suggest as sell targets. That said, if you want the quick gain, you might want to just lock in now. Longer term? There’s another angle here, however, that could merit you sticking around longer. Both GGN and GNT provide exposure to hard assets. This can provide a safe haven during turbulent times. If you think the market is at or nearing a turning point, either of these funds could be a ballast for your portfolio. And if you include distributions into returns (essentially looking at total return), the funds have solid track records. Both have outperformed Vanguard Precious Metals and Mining Fund (MUTF: VGPMX ) over the trailing three year period through year-end 2014, according to Morningstar. And GGN, which has been around longer, also outperformed Vanguard’s offering over the trailing five year period. So, comparatively speaking, they are a decent way to get exposure to this sector. Note that all of the funds lost ground over the trailing three- and five-year periods, so I am discussing relative performance not absolute performance. So, at the end of the day, there’s a reason to sit tight if you bought GGN or GNT for exposure to gold and natural resources. However, if the potential narrowing of the discount was your reason for buying either of these, you could lock in quick gains now. If you are hoping for a little more gain, you should, at the very least, start thinking about when you want to get out. For GGN I think a 3% premium could be a good selling point. For GNT I would be looking to sell when the discount narrows to 0%.