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Non-Tech : CEF Closed End Fund Investing

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From: brehm2335/14/2012 5:39:07 PM
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Any thoughts on GGN?

I own a few shares, not sure why, except for the distributions. Seems S/A articles like it. Per cef, its not covering distributions, and trades at a premium.

GAMCO Gold & Natural Resources

Another gold related company getting cheaper by the day is Gamco Gold & Natural Resources Income Trust. GGN is a closed end fund which utilizes a covered call strategy on the majority of its portfolio holdings. This strategy generally consists of writing "out of the money call options" for each of the assets owned in the portfolio. The premiums that are collected contribute to the monthly distributions made by GGN.

This particular play on gold, precious metals, commodities, and energy offers an incredible yield of over 11% paid monthly. The payout history is very consistent and stable. GGN also offers a dividend reinvestment plan (DRIP) which allows an investor to purchase shares at a discount to market price under certain conditions.

As of the end of last year the portfolio of GGN included 45% in stocks and fixed income securities of gold and other precious metals mining companies, 43% in stocks and fixed income securities of energy companies, and 12% in stocks and fixed income securities of base metal and other commodity companies.

The current net asset value of GGN is 13.31. It is currently trading at around 14.60. This represents a 10% premium over net asset value. GGN regularly trades at a premium to NAV. I am a bit concerned with the shrinking NAV, but If they can keep leverage down I am comfortable with holding this CEF for the foreseeable future to reap the large monthly payouts.
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