Friday’s employment numbers showed lower wage growth than expected. That was good enough for traders to move into stocks, and the S&P 500 saw a 2.28% move on Friday, which is continuing into Monday’s session.

The lower wage growth was good, but we’re nowhere near being out of the woods regarding inflation.

Bottom line – it’s still important to target inflation-beating investments!

With that said, I want to draw your attention back to closed-end funds (CEF), a type of mutual fund that issues a fixed number of shares through a single initial public offering (IPO) to raise capital for its initial investments. Its shares can then be bought and sold on a stock exchange, but no new shares will be created, and no new money will flow into the fund.

The pick I have for you today hits my ideal sweet spot – huge potential for price appreciation, trading at a steep discount (less than $20 per share at the time of writing), and paying a whopping 11.39% dividend.

The Best Inflation-Beating Stock to Buy Right Now
The ticker is Virtus Diversified Income & Convertible Fund (ACV), a closed-ended balanced mutual fund. It typically invests at least 80% of its net assets (plus any borrowings for investment purposes) in a diversified portfolio of convertible securities, income-producing equity securities and income-producing debt and other instruments of varying maturities, of which at least 50% of total managed assets are invested in convertibles. Additionally, the fund has the latitude to write covered call options on the stocks held in the equity portion.

The fund’s portfolio breakdown is 59.53% in convertible securities, 21.79% in common stock, 13.68% in high-yield bonds, and 5.01% in cash and equivalents.

Regarding the portfolio’s top five sector allocations, information technology, healthcare, consumer discretionary, communication services, and industrials make up 27.2%, 17.43%, 14.4%, 12.15%, and 9.12% of the portfolio, respectively.

That large allocation to information technology has hindered performance in a rising rate environment, but once the Fed slows and eventually stops raising rates, that headwind will significantly diminish. From there, we could see investors start moving back into tech, which would give ACV a tailwind.

While investors wait for that to happen, ACV is paying an 11.39% yield, trading at a -6.23% discount to its net Asset Value. That’s great!

So, consider ACV for an investment that delivers a yield far above recent inflation numbers, has significant potential price appreciation, and trades at a discount.

As always, keep an eye on your inbox for more inflation-beating investment ideas, and have a great week!

— Shah Gilani

Source: Total Wealth