ASA- Lance Lewis has some interesting comments about this gold stock.
>>>That brings us to ASA. Those that follow ASA may have wondered why it was off so sharply this morning. Well, it was due to a bit of an overreaction to some old news. Back on Feb 8th, ASA issued a press release saying that it was going to be taking a $1.88 per share charge for income taxes due on unrealized gains in its portfolio. (Remember ASA is a closed end fund of primarily South African gold shares.) The press release finally hit the Bloomberg wires last night after the close. If holders had been on their toes, they would have seen this issue discussed in the annual report a month or so ago.
I want to point out 3 things here. First, ASA's NAV (net asset value) was $27.60 as of last Thursday. With ASA's close at $24.70 today (a difference of $2.90), it has already discounted the $1.88 charge and more. Now, its 2 largest holdings, AU and GOLD, make up over 40 percent of the fund's holdings. Those two stocks are both at new highs this week, and the rest of ASA's holdings are performing similarly well. So, ASA's NAV is actually higher than last week, making the discount to NAV even larger. Furthermore, ASA doesn't trade its positions, so the tax will likely never be incurred anyway. Thirdly, ASA is in the process of protesting the tax due to certain exemptions that had been understood back when ASA was created in the late 1950s. Consequently, the charge could be reversed out in the future.
The point of all of this is to say that there may be an opportunity in ASA due to this discount. Buying an asset for $2.50 that is actually worth $3 is what investing is all about. For the sake of full disclosure I'll again point out that I am (and have been for some time) long ASA personally. <<<< |
