Seeking Alpha
Profile| Send Message| ()  

A myriad of closed end funds (CEFs) took a big hit this week on the back of concerns about the fiscal-cliff and possible tax increases. This CEF sell-off, however, has not been a result of an overall decrease in net asset values (NAV) and, therefore, may present a buying opportunity for many funds.

(The net asset value of a CEF is the total value of all the securities in the fund divided by the number of shares and, therefore, represents the true current value of the fund. The market price of the fund, however, often varies from the NAV. When the fund's share price is higher than the NAV per share it is said to be selling at a premium; when it is lower it is selling at a discount to the NAV per share.)

As a result of the recent CEF sell-off, many funds are selling below their respective NAVs and appear significantly undervalued. So is it time to buy? I think so.

As their valuations are now much more appealing, I think we will see investors beginning to jump back in to CEFs, as we began to see on November 16, 2012, in search for a predictable yield in unpredictable markets.

Intended as a starting point, below is a list of five CEFs with an over 8% distribution, currently selling at a discount to NAV.

(A full list of CEFs currently selling at a discount to NAV with 8%+ distributions can be found here.)

1. Alpine Global Premier Property (AWP), which seeks income through investment in global equity and debt securities, is currently trading at $6.83, a 9.18% discount to its net asset value of $7.52. The fund offers an 8.78% annual distribution rate, with distributions occurring on a monthly basis. The current distribution amount of $0.0500 per share has remained unchanged since July, 2011.

2. H&Q Life Sciences Investors (HQL), which seeks long-term capital appreciation through investment in equity and equity related securities of global companies and securities of Life Sciences Companies, is currently trading at $13.97, a 4.25% discount to its net asset value of $14.59. The fund offers an 8.59% annual distribution rate, with distributions occurring on a quarterly basis. Distribution amounts have increased steadily since August, 2010, with the current per share distribution at $0.1300.

3. First Trust High Inc Long/Short (FSD), which seeks current income with capital appreciation through investments in a portfolio of U.S. and Global high yield corporate fixed income securities of varying maturities, is currently trading at $17.91, a 4.84% discount to its net asset value of $18.82. The fund offers an 8.94% annual distribution rate, with distributions occurring on a monthly basis. The current distribution amount of $0.1335 per share has remained unchanged since December, 2010.

4. H&Q Healthcare Investors (HQH), which seeks long-term capital growth through investment in healthcare and medical technology firms, is currently trading at $17.19, a 4.02% discount to its net asset value of $17.91. The fund offers an 8.38% annual distribution rate, with distributions occurring on a quarterly basis.

5. First Trust Strategic High Income Fund II (FHY), which seeks high current income with capital growth through investment in non-investment grade and investment grade debt and equity securities, is currently trading at $16.40, a 2.44% discount to its net asset value of $16.81. The fund offers a 9.70% annual distribution rate, with distributions occurring on a monthly basis. Distribution amounts have increased steadily since 2010, with the current per share distribution at $0.1325.

Source: The CEF Sell-Off: Time To Buy?