You’d think value investors would have gone the way of the T. rex and dodo, what with the S&P 500 price/earnings (P/E) ratio sitting somewhere around 34.1 and all.
You’d think bargains in such an expensive market would be virtually nonexistent – never mind the fact we’re nowhere near the all-time high P/E ratio of 123.73.
But I’m here to tell you: Undervalued bargains are still very much alive and kicking, and I’ve found a great one for you today.
It’s not a stock, strictly speaking, but a special kind of fund that most investors are able to buy and sell easily, every day the markets are open.
And you’ll want to buy plenty…
There’s Not Much This Fund Can’t Do
Unlike a lot of things I could think of, the Boulder Growth & Income Fund (NYSE: BIF) does what it says on the label.
Boulder is what’s called a “closed-end fund,” or “CEF.” That doesn’t mean it’s closed to new investors, though that’s a common misconception. Shares are traded on exchanges, like the NYSE in this case, but they’re not exchange-traded funds. Robinhood notoriously cut off customers’ access to most, if not all, CEFs, but most other major brokerages handle them with no problems.
They share some qualities with exchange-traded funds, though, like pro management teams managing a portfolio of investments. And both ETFs and CEFs can be treated a lot like stocks – you can short them if you want, buy them on margin, or use limit orders. They’re also priced throughout the day, unlike mutual funds, which are priced daily at the close. CEFs don’t redeem their shares daily like mutual funds do; there’s a fixed number of shares.
There’s another big difference: By their nature, CEFs often trade at hefty discounts from their net asset values (NAV). Boulder, for instance, is currently trading for roughly 85 cents on the dollar, or a 15% discount.
That alone is worth moving on, but here’s what you’ve got to know about the fund – what sets it apart from the crowd.
Boulder’s stated investment philosophy is bedrock-sound, especially at a time when the market is a cacophony of fear and dubious claims: “Invest in good businesses at attractive valuations for the long run.” Fund management, which has kept the lights on since the early 1970s, is risk-averse, not given to the kind of freewheeling speculation that’s characterized the post-COVID “Robinhood” phenomenon.
If any of this sounds familiar, it’s because, for all intents and purposes, Boulder is run the exact same way Warren Buffett and Charlie Munger run Berkshire Hathaway’s investments. Berkshire Hathaway itself is an all-around great buy, including its $412,900 “A” shares.
Just the other day on “Money Morning LIVE,” volatility expert Mark Sebastian was talking about how Berkshire is historically cheap, and, from where I’m standing, BIF is a way to make it even cheaper.
At the end of the day, you own a fund like BIF because it’s a low-cost way to replicate Buffett’s legendarily successful investing strategy, and its already inexpensive $13 price tag represents a 15% discount to its true value. You’ve got to move quickly, though, because these discounts can easily vanish.
— Garrett Baldwin
Source: Money Morning