Closed end funds....

Closed end funds, which sold off sharply in 2008 have in many cases rallied significantly the last few months as investors, attracted by the large discounts and high yields begin to buy back into the sector.

Below are a few that are worth considering:

TSI - managed by Jeffrey Gundlach, who also runs one of the top performing open ended bond funds. TSI benefited in late 2008 because of their relatively large holdings in agency (FNM, FRE, GNM) bonds, which rose in value when Treasury and the Fed began buying MBS directly. This allowed TSI to declare a special dividend of .08 in addition to the regular dividend of .075.

NCV - Invests in convertible debt, dividends were suspended in late '08 but were resumed recently at a monthly rate of .09.

NBH - Some of the Neuberger Berman muni funds look attractive, this one is the national muni fund, NBW for example is the state specific fund for CA. These are intermediate term, and durations are around 4-5 years, and means that much of the portfolio matures in a relatively short time, allowing reinvesting of matured bonds into more attractive securities. This is in contrast to many bond funds which have very long maturities, up to 20-30 years, which means they are locked into bonds that may not be as attractive as others, and limits the ability of the fund to redeploy assets into other securities.

SLM Preferred Stock A

I added a post about preferred stocks some time ago and thought it worthwhile to revisit them. SLM has several outstanding, including 'A' and 'B' shares. The major difference is that 'A' pays a fixed rate, while 'B' is floating, based on LIBOR. The drop in LIBOR the last few months makes the 'A's more attractive, at a price of around $30, the effective return is almost 12%, and the dividend is qualifed, meaning it's taxed at a rate of only 15%. A good tax loss strategy to consider last year if you owned the 'B' was to buy the 'A's to maintain a position, and sell the 'B'. It probably would've worked out since the 'A's have rallied sharply over the last few months from the low 20's, and were as low as $18.75 at one point.

SLM has been able to line up financing and is expected to get support from the Treasury/Fed. Results and estimates suggest SLM should be able to remain cash flow positive, meaning common stock dividends should be maintained, which in turn implies the preferred stock dividends will continue to be declared.