Dreman/Claymore Dividend & Income Fund: Fund Management is Everything; DCS is a Case in Point

Usually when I write about a closed-end fund, it's because the fund is in the news for some reason, and often it's not good news. Because of this I don't get a chance to write about some of the funds that I like that are not in the news. So I've decided to write periodically about funds that I follow just for their investment merits. One of these is the Dreman/Claymore Dividend & Income Fund (DCS).

I've been watching DCS since its inception because of its adviser, Dreman Value Management. David Dreman wrote the book on contrarian investing, and I like his philosophy of buying out of favor stocks. And most importantly, he has a really good long term track record (see KDHAX).

If I had to own an actively managed open end fund, his funds would be some of the few that I would consider. However, I think Dreman Value Management's strategy is better suited to closed-end funds. When they buy an unpopular stock, like they did with Altria (MO) a few years ago, and if it doesn't work out right away, his open end funds can be forced into selling undervalued stocks by redeeming shareholders. But with a CEF, Dreman can give his stock picks time to work out.

On the down side, I wouldn't mind if the fund's management fees were lower. But its expense ratio is still competitive with similar open end funds, and are negated somewhat by the discount.

According to CEFA.com, DCS traded at a -12.52% discount as of 8/15. I have purchased shares at times over the past year when the discount was around -14%, and would consider making more purchases whenever the discount is in that neighborhood. While I do hold some other dividend-focused funds, DCS is my favorite when I can get shares at these types of discounts.

DCS 1-yr chart:

KDHAX 4-yr chart:

Comments

[valuefan]

I like DCS too and have been buying regularly. At first I thought
the fee seemed high, but since he uses leverage and has over 18%
in foreign stocks, I think it deserves a little higher fee than a vanilla
US large cap fund.