Saturday, October 11, 2008

Shopping for Big Discounts -- IGA

no, this post is not about your independent grocer. though I worked for the local IGA in college. five bucks an hour. now that I think of it, that's more than I'm getting paid to write this blog. and there at least I got to flirt with some of the local girls. a chick called me 'cowboy' once. I thought that was cool for some reason.

but then one day the manager called me and the other girl that was working the previous afternoon and told us to come down to the store. I walk into the little deli room in the rear and there's the other employee, the manager...and a Cop. turns out the day before someone stole like $90 from the cash register and tried to cover it up by voiding out a few bogus purchases. it musta been me or the other girl working at time of the crime. I didn't do it. and she wasn't admitting to it. tough situation for a kid to be in. so when I realised I wasn't going to get any vindication there in the deli, with the Cop nonchalantly resting his hand on his holstered pistol and my co-worker not fessing up, I did the only honorable thing to do. I quit the job. I just told the manager that while I didn't steal the money, it would obviously be impossible to continue working here with that hanging over us.

have you ever been accused of a crime that you didn't do? it's pretty scary. I was scared, and that was something really petty. but there are people (lots of them) in prison for stuff they never did. some of them won't get out. sucks don't it?

okay, sorry for the tangent. the IGA I had in mind is actually the ticker for a closed-end fund, ING's Global Advantage and Premium Opportunity Fund. (I trust that whoever came up with that fucking name has been fired by now...)

I came across this dog when I was searching on for funds trading at large discounts to their Net Asset Value (NAV). to give you an idea about where this market is in terms of sentiment, there are at total of 18 closed end funds on their database that are trading at a premium to their NAVs. of these the median premium is a little under 7%. meanwhile there are 636 funds that are trading at discounts to their NAVs, with a median discount of slightly less than 30%.

I was searching from the biggest discount down and IGA was the first fund I came across that wasn't some REIT, or bond fund of some type. it's currently trading at a 32% discount. it invests in over 500 US and international companies. (click here for most recent holdings.) it's your typical broad market fund -- except that they also write call options on a portion of the fund's holdings to generate a little extra income. I'm sure at this point a lot of people want to stay out of anything that has anything to do with derivatives, so maybe the options business isn't helping the share price cause at this time. but for the most part the options strategy seems innocuous. if you had a $300 million stock portfolio I bet you'd be selling options on it too.

IGA closed Friday at 8.10, down 55% since the beginning of the year. they've been paying a quarterly distribution of 46.5 cents a quarter, yes, that is over 20% a year. that could very well get cut some, but the point is that you got a stock portfolio here that's trading 30% cheaper than what it would cost to go buy all the stocks yourself.

but...should we be running out to buy stocks at all right now? oh, I'm sure there were at least a few stocks that hit cyclical bottom last week. but the Stock Markt as a whole? eh. seems unlikely. too much volume. but officially 'no comment' for now. we'll take a look at it closer here before too long. tranquilo.

but for those who want to gamble on a near-term market bounce this here IGA looks like a decent play. just hope they didn't sell any call options Friday morning...

oh heck, no post would be complete without a chart: