Preface: Every six months it’s time to review the previous 12 months of Joe Eqcome’s closed end fund ((CEF)) research to determine what’s working, what’s not, and why?

Research Reviewed: Since October of 2008, there have been 16 articles written by Joe that had associated investment recommendations. (Most, if not all, have been posted on Seeking Alpha.) Thirteen articles focused on equity-oriented CEFs and three focused on debt-oriented CEFs.

Summary: Lower share price closed-end funds ((CEF)) have a significant price appreciation advantage relative to higher share price CEFs in a stock market recovery. Current beneficiaries may include: [[BLU]], [[CIK]], [[ASG]], [[ZF]], [[USA]] and [[ZTR]] (see table).

The chart below illustrates the top and bottom share price quartiles of a sample of 121 CEFs based on share price appreciation 3, 6 and 9 months from the October 2002 stock market trough. The average price appreciation difference between the lowest and highest share price CEF quartiles for the 3 periods was 9.9%. (The comparable difference between small cap stocks, as measured by the ETF [[IWM]] and large cap stocks, as measured by [[SPY]], was 6.7 %.)

Many investors think that the perfect stock is one that sells for a low price and pays a high yield. It may be hard to believe but there are actually several stocks, including closed-end funds or CEF's, that sell for less than $5 a share and pay a dividend, with five of the stocks with yields in excess of 6%.

All of the following stocks pay quarterly unless otherwise specified. Also, all of the following have market caps above $265 million. Just remember that the yields are based on historical payments, and the dividends can be adjusted or terminated at any time.

The Herzfeld Closed-End Fund Average recently moved to a premium to net asset value [NAV] for the "first time in my memory", according to Barron's columnist Randall Forsyth. A reminder: closed-end funds issue a fixed number of shares that are free to trade above or below their net asset value; new funds often price initially at premiums to NAV due to promotion by brokers (and irrational investor behaviour), but tend to revert quickly to discounts to NAV. The Herzfeld Closed-End Fund Average measures the average discount or premium to NAV for a broad index of closed-end funds, and recently moved to an average premium -- a phenomenon almost without precedent. A number of funds swung dramatically from discounts to premiums to NAV in 2006, such as the Cohen & Steers Worldwide Realty Income Fund (RWF). Many closed-end funds now site at hefty premiums to NAV, including the Zweig Total Return Fund (ZTR), the Cornerstone Total Return Fund (CRF), and the Cornerstone Strategic Value Fund (CLM). Closed-end fund investment veteran David Tepper of Tepper Capital Management says that the only funds still attractively priced below NAV are "old school" funds like General American Investors (GAM) at a 9.22% discount, Adams Express (ADX) at a 13.84% discount, and Central Securities (CET) at a 13.24% discount.

The simple answer is "yes." By adding to the number of shares outstanding, a rights offering will dilute the value of the holdings of existing shareholders. But it's important to take a closer look at the rights offering to see what strategies the company has put in place to offset the potential dilution.

Snapshot: Over half of this fund's portfolio is in risk-free U.S. Treasuries. The balance is mostly in blue-chip dividend-payers like pharmaceutical giant Bristol-Myers (BMY) and chemical maker Dow Chemical (DOW). The bonds carry the highest credit rating possible with virtually no risk of default. They have an average duration of about six years, making the fund well positioned for a stable interest rate environment.

Dividend: The fund has paid dividends every month for the past two decades. Its latest monthly payment of $0.043 a share equates to $0.52 annually, providing a 9.3% yield at today's share price. A 1.02% management fee brings the effective yield to 8.3%.