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Douglas Albo
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Registered Investment Advisor. Prior experience includes 12-years as a Vice-President, Financial Advisor at Smith Barney and Morgan Stanley.
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Capital Income Management, LLC
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  • GRX Goes Ex-Rights Today 4 comments
    Jun 13, 2013 12:38 PM | about stocks: GRX, GAB, GUT, GGT

    GRX is down over 6% as its Rights Offering goes ex-rights today. Shareholders as of yesterday would be entitled to 1 right for every 3 shares of GRX owned. This is why GRX was up yesterday in a very weak market but is down today. Buying GRX today means you don't get the subscription rights. The subscription price is $9 which is a pretty sizeable discount to yesterday's closing price of $10.43, which was also on its ex-dividend date.

    At a $9.80 market price currently, trading without the rights, I believe this drop is overdone. Considering GRX has an NAV of $11.28 and this rights offering will bring down the NAV only a few percent according to my calculations, that is still an extremely wide market price discount. Obviously, for existing shareholders who don't want additional shares, you could sell 1/3 of your position in GRX today and retain the rights to buy at $9, hence why the stock is down so much.

    Now if you don't own GRX, this might be a good time to step up to the plate and buy one of the best performing funds around. GRX is a very small fund with only 11.2 million shares outstanding so obviously Gabelli wants to increase the fund's size and investment capability. GRX is a leveraged healthcare & wellness stock CEF (no bonds) which has the BEST NAV performance of any CEF I follow, up 20.2% on its NAV YTD and up 47.9% since 2012. GRX will also yield about 4.1% if this drop holds but GRX is much more about appreciation than yield.

    Gabelli has one of the best fundamental research teams around and that is reflected in many of their leveraged stock CEFs like GAB trading at a 7.3% premium, GUT trading at an 11.6% premium and GGT at a 1.7% premium. With GRX at a sizeable discount and better NAV performance than any of them, I believe GRX is severely undervalued.

    Disclosure: I am long GRX.

    Stocks: GRX, GAB, GUT, GGT
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Comments (4)
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  • 7of9
    , contributor
    Comments (299) | Send Message
     
    Period strong performance is usally followed by weak performance in a given sector. It looks like this sector is fully valued.
    13 Jun 2013, 08:45 PM Reply Like
  • Douglas Albo
    , contributor
    Comments (600) | Send Message
     
    Author’s reply » If GRX was fully valued, it would be trading at par. GRX is also much more than big pharma, big healthcare providers and big healthcare equipment makers. GRX also focuses on public companies involved in the wellness trend in America. That means much smaller companies focused on nutrition and healthier lifestyles. There were probably a half dozen companies involved in mergers last year that were involved in this trend that GRX owned.
    13 Jun 2013, 11:17 PM Reply Like
  • galicianova
    , contributor
    Comments (1802) | Send Message
     
    Doug, excuse my stupid question. i do own since dec 12 GRX (thanks to you, of course!) how one proceeds with rights i'm entitled to? - will i be notified by a broker ? thanks!
    19 Jun 2013, 01:14 PM Reply Like
  • Jerbear
    , contributor
    Comments (559) | Send Message
     
    I received an email from my broker with the information.

     

    It states; "The Fund expects to mail subscription certificates evidencing the Rights and a copy of the prospectus for this offering to record date shareholders beginning on June 19, 2013. Financial Advisors will likely send notices to you shortly there after."
    21 Jun 2013, 07:45 PM Reply Like
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