Economic Investment Trust: A Canadian Closed-End Fund Worth Considering

Includes: BNS
by: Robert Lewis

Economic Investment Trust Limited is a closed-end fund traded on the Toronto Stock Exchange under the symbol EVT. It was launched in 1928 and has never redeemed or purchased shares. EVT fully intends to remain a closed-end fund.

As of March 31, 2011, EVT had gross assets of $479,935,000 and does not use leverage. A major portion of its portfolio is concentrated on just three companies, all Canadian. The balance of its portfolio is invested globally and managed by Sanford C. Bernstein & Co., LLC, a highly respected investment manager based in New York.

EVT's three major investments, as of March 31, 2012, were as follows:

E-L Financial 36.8%
The Bank of Nova Scotia 9.1%
Algoma Central 7.3%

The rest of the portfolio is well-diversified and globally invested. These investments are in the following geographic areas:

United States 20.1%
Europe 7.7%
United Kingdom 6.1%
Asia 7.9%

EVT has small short positions against the yen and British pound to partially hedge currency exposure. As of March 31, 2012, the portfolio's cost basis was $259,574,000 and its market value was $479,935,000. (Please note that all figures are in Canadian dollars.)

EVT presently trades at a 28% discount from net asset value. This discount has been as high as 45% and as low as 20%. This is to be expected in light of its concentration of assets.

The Bank of Nova Scotia (NYSE:BNS) is a highly respected and large Canadian bank. It is stable and growing. The largest asset, E-L Financial, is a financial service holding company focused on insurance. It does sell at a high price/earnings ratio, but it also trades at 60% of book value. Algoma Central has been operating ships on the Great Lakes since 1900 and is the largest inland shipping company in Canada.

EVT is an interesting investment. Approximately 50% of its assets are invested in three large and solid Canadian companies, while the remaining 50% are invested globally through a third-party investment manager with a fine reputation. The discount from net asset value of almost 30% adds to its appeal.

As usual, I would not investment all my money in EVT, but I would own it as part of a basket of closed-end funds.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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