Central Fund of Canada (CEF.A)
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Thread: Central Fund of Canada (CEF.A)

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    Question Central Fund of Canada (CEF.A)

    What are your thoughts on this stock? anyone?


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    This is not a stock. It is a Closed-end Fund that holds gold and silver bullion. IMO, it is an excellent way to own precious metals. Note that since it is a CEF, the market price may be different from the NAV.
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    Quote Originally Posted by CanadianCapitalist View Post
    This is not a stock. It is a Closed-end Fund that holds gold and silver bullion. IMO, it is an excellent way to own precious metals. Note that since it is a CEF, the market price may be different from the NAV.
    Thanks for the correction. What I understood from their website is that the price may or may not be affected by the price of the precious metals. Not sure how this works.

    What is NAV?

    I also noticed that the earnings have been increasing since 2003 (except for 2008 where the earnings were negative, not sure why) and assets have been steadily increasing since 2000

    Any insights would be appreciated.

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    NAV is Net Asset Value. It is the per-share value of the net assets of the fund, in this case, the net value (after fees, expenses and other fund liabilities) of the gold/precious metals (and possibly a tiny bit of cash) held by the fund. The market price can differ from the NAV by significant amounts with close ended funds because these funds don't create or redeem shares as a matter of course to account for inflows and outflows like ETFs do. So if more people want to sell the fund than want to buy, the price will tend to get pushed to less than NAV (a discount to its value). Similarly, if people are piling in to the fund and are willing to pay, the price will rise above the NAV. Closed ended funds are not all that popular compared to ETFs for a variety of reasons. One is this uncertainty of the market price return in relation to the NAV return. There are some tax differences too, I think.

    If you can pick up the fund for a discount, it might make sense. As of today, it closed at a 4.2% premium to the value of the funds assets. It's a bit like paying $10.42 for a ten dollar bill. Hopefully when you sell it, someone is willing to pay you $10.42 for it, but you can't count on it.

    http://www.centralfund.com/Nav%20Form.htm

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    The reason why the fund changes in value is because it owns primarily gold and silver, and they have changed in value. Look at GLD (for gold) and SLV (for silver) to get an idea. These are US-listed ETFs that hold bullion.

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    Quote Originally Posted by andrewf View Post
    If you can pick up the fund for a discount, it might make sense. As of today, it closed at a 4.2% premium to the value of the funds assets. It's a bit like paying $10.42 for a ten dollar bill. Hopefully when you sell it, someone is willing to pay you $10.42 for it, but you can't count on it.

    http://www.centralfund.com/Nav%20Form.htm
    Thanks Andrew. Why would any one want to pay $10.42 for a $10 bill? does not make any sense?!

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    I was being somewhat facetious. With CEF, you're buying their management. Maybe that's worth a premium over the liquidation value of the assets of the fund. I can't say.

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    What would be a reasonable premium/discount to get in at for this closed end fund?

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    I view CEF.A (CEF amex) as buy and hold;
    however, if I was trading,
    I would buy at 4% discount
    and sell at 6% premium

    historical premium/discount

  11. #10
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    Is there anywhere I can find a chart on the premium/discount that CEF has been trading at?


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