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Joe Eqcome is the pen name of Robert A. Frank, CFA, a Wall Street executive who has spent over 30 years as an investment professional. Mr. Frank is the founder of GrowthIncome Research & Management, LLC. GrowthIncome Research & Management, LLC’s business mission is focused on generating... More
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  • CEF 2010 Flash Monthly & Yearly % Price Changes 0 comments
    Jan 3, 2011 8:53 AM | about stocks: ADX, TY, GD

    Summary: CEF market segment share price performance in 2010 came fairly close to guesstimations outlined earlier in the year in an article posted January 5, 2010, entitled:  CEF 2010 Outlook: Modest Gains; Equity-Orientation[1],[2].


    Rather be Lucky than Smart:
    On average, the CEF stock market segment was up a modest 6.7% in 2010 versus 12.8% for the S&P 500. As the chart above demonstrates, there is a wide range of returns for the 13 diverse fund types that constitue the CEF stock market segment. 

    So, the average CEF market segment return is like a person with his head in the oven and his feet in the freezer: on average he comfortable. So, fund type and stock selection is an important consideration in generating superior or inferior return in the CEF stock market sector.

    With the exception of
    LoanPartFnds, those fund types scoring above the CEF average were all equity-oriented. The 2010 year-end results for the CEF stock market segment were strongly influenced by the robust year-end performance of equity CEFs while fixed-income CEFs types slumped.

    Sectors & Stocks Recommended: The article’s recommendations for CEF sectors in 2010 were ConvSecFnds (+11.1%), PrefStkFnds (9.9%) and GenEqFnds (9.8%). All the recommended sectors preformed better than the CEF average. Individual stock recommendations were up in 2010 on average 14.3% (see chart related chart).

    The Good, the Bad and the Also Ran: The SpecEqFnds and WrldEqFnds performed the best of all fund types. In the case of SpecEqFnds investors focused on hard assets (natural resources, precious metals and real estate) as a protection against the prospects of inflation. Investors were also buyers of WrldEqFnds in an effort to participate in global economies growing faster than the US that were also unburdened by sovereign debt issues.  

    Both SingleStMuniFnds and NatlMuniBndFnds ended the year with a “thud” as valuations dropped with investors’ concerns roiling over ailing municipal budgets, curtailment of federal funding for state budgets, more supply of muni bonds with the likely demise of the Build America Bonds (“BABs”) and the prospects of higher interest rates. 

    Outlook for 2011:  It is anticipated on average the CEF market segment to underperform the general equity markets as measured by the S&P 500. This will likely be the results of a weaker performance by the fixed-income CEFs as it is my outlook for a sustainable economic recovery and the likelihood that the US will experience higher inflation and interest rates. GenEqFnds continues to be a fund type that may perform well as the economy picks up pace and the $2.0 trillion in non-financial corporate coffers gets unleashed on M&A, capital expenditures, stock buybacks or enhanced cash distributions.

    Caveats: While the 2010 projections were broadly correct, there can be no assurances that my guesstimates for 2011 of an underperforming CEF stock market sector will in fact be realized.

    (A more detailed report regarding 2011 shall be forthcoming.)

    Joe Eqcome (Long: ADX, TY & GDV)


    [1] http://joeeqcome.web.officelive.com/Documents/JoeRschOutlook2010_010509.pdf [2] The article contains some detailed historical information that may be interest to some dedicated CEF investors.

     

    Themes: equity income, cefs, closed end funds Stocks: ADX, TY, GD
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