A Wall Street Transcript Interview with Jonathan S. Raclin, Registered Principal of Barrington Asset Management, Inc. and Managing Director of The Enterprise Portfolio: Investing in Closed-end Mutual Funds
67 WALL STREET, New York - January 7, 2013 - The Wall Street Transcript has just published its All-Cap Growth Investing and Other Strategies Report. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.
Topics covered: All-Cap Growth Investing - Closed-end Mutual Funds - Investing in Gold - Bottom-up Investing
Companies include: BlackRock, Inc. (BLK), Synovus Financial Corp. (SNV) and many others.
In the following excerpt from the All-Cap Growth Investing and Other Strategies Report, an experienced portfolio manager discusses his current investments:
TWST: What traits do you like to see in funds when you are putting together a portfolio?
Mr. Raclin: Our portfolios are divided into three parts. The first reserves - which today approximate 20% of client portfolios - is evenly divided between cash and a gold and silver bullion fund. Cash is invested in a government-only securities fund. We custody most client accounts in JPMorgan, but I also have accounts held at Fidelity, Citibank, Charles Schwab, Merrill Lynch, etc.
The second half in the reserve portion is the Central Fund of Canada (CEF), half gold bullion and half silver bullion fund that presently trades at a slight premium to net asset value. Importantly, it is not a mining company fund nor invests in options or futures. It owns several billion dollars worth of gold and silver bullion on deposit in unallocated holdings in a major bank in Canada. I use it as an insurance policy.
The second part of the portfolio, approximately 40%, is the equity income portion presently comprised of three funds; the Calamos Convertible & Income Fund (CHI), which currently yields about 9%, half invested in high-yield bonds and half evenly split between convertible bonds and convertible preferred stocks. We own the Alpine Dynamic Dividend Fund (AOD), which is a broadly diversified portfolio of stocks primarily in the United States, but also in non-euro-based Europe and some in emerging markets such as Brazil. This fund is focused towards dividend capture and should be a beneficiary of many special dividends which are being paid at this year's end. The third fund is the Eaton Vance Tax Managed Fund (ETB), essentially a managed S&P 500 portfolio. They pay a monthly distribution at an annual rate of 9%, but of the 9%, 7% is a return of capital. They write index options on the portfolio with the premiums treated as a return of capital. Effectively, that means you get the dividend on a monthly basis and do not have to pay a dividend tax, but rather lower your cost basis. In essence, we are converting ordinary income into long-term capital gains.
The third part of the portfolio, the growth portion, owns General American Investors (GAM), which was founded in 1927. It's a very stable, extremely well-managed portfolio of large and medium-sized companies. We also own two natural resources portfolios managed by BlackRock (BLK); BlackRock Global Resources (BGR), which is almost exclusively focused in energy to include companies oil, gas, coal, a variety of service companies, etc.; and secondly, the BlackRock EcoSolutions (BQR), which is primarily invested in water-related and in agricultural-related companies.
Some of my clients, those whom are somewhat more aggressive, also have a portion of their portfolio invested in a regional bank holding company, Synovus Corporation (SNV) of Columbus, Georgia. We began to acquire the position at $1.50. It's now trading at approximately $2.50. We think it could be worth more as the housing recovery, especially in the Southeast, continues to show strength. Many of my investors also...
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