Tri-Continental: Safety At A Discount

| About: Tri-Continental (TY)

Tri-Continental Corporation is one of the oldest closed-end funds in the United States, having been launched in January 1929. It is traded on the New York Stock Exchange under the symbol TY. Long owned and managed by J & W Seligman, it is now owned and managed by Columbia Management, a large mutual fund complex, which is owned by Ameriprise Enterprises. Columbia Management was owned by Bank of America until being sold to Ameriprise.

For many years TY simply owned and held large-cap companies but in recent years, management has been gradually moving a portion of its assets into convertible and fixed income bonds. As of December 31, 2012, its portfolio breakdown was as follows:

Common Stocks 68.6%
Convertible Bonds 12.1
Convertible Preferreds 5.5
Corporate Bonds 11.9
Money Market Funds 1.9
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TY's ten largest holdings were as follows:

Apple 3.0%
Pfizer 2.2
JP Morgan Chase 2.1
Chevron 2.1
Verizon 2.1
Microsoft 2.0
Phillip Morris


BlackRock 1.8
Amgen 1.6
ConocoPhillips 1.6
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As of December 31, 2012, TY had gross assets of $1,220,922,216 of which $37,637,000 represents preferred stock issued a lifetime ago. Its investment portfolio of $1,216,283,608 has a cost basis of $1,108,599,978.

With a portfolio of large-cap stocks, its performance has been very mediocre but not terrible:

Mkt. Value NAV S & P 500
1 Year 16.77% 16.24% 16.00%
5 Years (0.65) 0.61 1.66
10 years 5.95 5.83 7.10
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Five-year ratios show very low operating expenses, decent income and average portfolio turnover. It should be noted that TY has always had very low operating expenses:

Operating Expenses Investment Income Portfolio Turnover
2012 0.52% 3.28% 68%
2011 0.59 1.80 97
2010 0.60 1.84 86
2009 0.98 1.46 70
2008 0.73 2.90 111
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TY has always sold at a substantial discount from net asset value. Even in a rising market for large-cap stocks it still commands almost a 13% discount. In light of this balanced portfolio of convertibles, credit sensitive bonds and common stock, I strongly believe that TY is worth consideration. It is a nice portfolio with low operating expenses, which has been around for a long time. It is in the hands of a large strong management company.

I cannot see too much harm coming to anyone owning TY as part of a basket of other funds.

Disclosure: I am long TY. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.