The Zweig Fund, Inc. (ZF), Adams Express Company (ADX), Tri-Continental Corporation (TY): How To Buy A Dollar For 85 Cents

Real life examples

Right now, there are three CEFs that are worth your close attention. All three are relatively safe funds because they invest solely in large cap U.S stocks that have sufficient liquidity. This means that the fund shouldn’t have any problem to liquidate its position in the market and pay back the difference (the discount) to its shareholders.

1. The Zweig Fund, Inc. (NYSE:ZF) is a $355 million closed-end-fund that invests mostly in U.S equities. Its major holdings include large, highly liquid names such as Apple, Qualcomm, JPMorgan Chase and MasterCard. Shareholders enjoy a distribution rate of 7%. In addition, the fund currently trades at a discount of 12.26% to its NAV. This means that if the fund, as a whole, sells all of its assets tomorrow, it’s left with 14% more cash that what it trades for today. Pretty amazing, isn’t it?
2. Adams Express Company (NYSE:ADX) invests in the same segment as The Zweig Fund, Inc. (NYSE:ZF). The huge $1.3 billion fund is currently invested in names like IBM, Honeywell International and Merck. Investors in this fund enjoy an annual distribution rate of 5.6%. In addition, they are likely to enjoy some capital gains too. The fund is currently trading at a 12.9% discount to its NAV.
3. Tri-Continental Corporation (NYSE:TY) is a $1.3 billion fund. Over 10% of its capital in invested in Cisco, Microsoft, Pfizer, Chevron and Apple. Tri-Continental Corporation (NYSE:TY) has a relatively modest distribution rate of 3.8%. It’s now trading at a respectable discount of 12.85%.

The Fool looks ahead

There’s never a free lunch in the markets–but from time to time you can have a free snack. Investing in high quality, highly liquid closed-end-funds is a winning strategy. Invest accordingly.

The article How To Buy A Dollar For 85 Cents originally appeared on Fool.com and is written by Shmulik Karpf.

Shmulik Karpf has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Shmulik is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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