Four Foreign Closed-ends With Gains Ahead

Investing in regions or countries outside of Canada and the United States can entail above-average volatility and risk. But these areas can also offer vast potential growth.

We still think that for most investors, the best way to invest in those regions or countries is through mutual funds, rather than individual stocks. And you can cut your costs by buying closed-end funds.

Here are four closed-end funds trading on the New York Exchange at discounts to their net asset value. All four are buys.

CENTRAL EUROPE AND RUSSIA FUND $48.14 (New York symbol CEE; CWA Fund Rating: Speculative) is a closed-end fund that invests mostly in larger cap stocks from Russia and central Europe. The fund’s manager is Deutsche Asset Management International.

The $880.2 million fund’s 60 holdings are currently invested in Russia (55%), Poland (17%), Turkey (11%), Czech Republic (6%), Hungary (5%), Austria (2%) and Bermuda (1%).

Central Europe and Russia Fund’s top holdings are Gazprom (a Russian gas utility) at 14.9%; Lukoil (Russian oil and gas), 6.3%; Norilsk Nickel (Russian metals and mining), 5.6%; Rosneft Oil Company (Russian oil and gas), 5.0%; Powszechna Kasa Oszczednosci (Polish bank), 4.6%; Sberbank (Russian bank), 4.6%; Bank Pekao (Polish bank), 3.6%; Telekomunikacja Polska (Polish telecom), 3.6%; and Turkiye Garanti Bankasa (Turkish bank), 2.8%.

Central Europe and Russia Fund sells for a 13% discount from the current value of its assets.

Central Europe and Russia Fund is a buy.

KOREA FUND $24.05 (New York symbol KF; CWA Fund Rating: Speculative) is a closed-end fund that invests at least 80% of its assets in Korean equities. Currently, 99% of its assets are in South Korean stocks. The fund’s manager is RCM Asia Pacific.

The fund’s top holdings are Samsung Electronics at 7.3%; Posco (steel), 7.0%; Hyundai Heavy Industries (shipbuilding), 6.6%; Shinhan Financial, 4.3%; GS Engineering and Construction, 3.4%; Shinsegae Co. Ltd. (investment and credit research), 3.3%; NHN Corporation (online media & web sites), 3.1%; Daewoo Shipbuilding & Marine, 3.1%; KT&G Corporation (cigarette maker), 3.0%; and LG Corporation (conglomerate), 2.9%.

The industry exposure of the 38 stocks in the fund’s $832 million portfolio is as follows: Industrials, 37%; Financials, 16%; Information technology, 14%; Materials, 10%; Consumer staples, 6%; and Consumer discretionary, 5%.

Korea Fund sells for a 7% discount from the current value of its assets.

The Korea Fund is a buy for more aggressive investors.

NEW GERMANY FUND $15.92 (New York symbol GF; CWA Fund Rating: Speculative) is a closed-end fund that invests mostly in middle-market (small and mid-cap) German equities. The fund’s manager is Deutsche Asset Management.

The $451 million fund’s 50 holdings are currently in Germany (93%) and the Netherlands (6%). The New Germany Fund’s focus on mid-tier German stocks provides investors with access to some of Germany’s fastest-growing companies.

The New Germany Fund’s top holdings are K+S (chemicals), 6.9%; Fresenius (health care equipment & supplies), 5.6%; Q-Cells (solar cell manufacturing), 5.3%; European Aeronautical Defense (Dutchbased aerospace and defense), 4.7%; SGL Carbon (electrical equipment), 3.8%; GEA Group (chemicals), 3.7%; Solarworld (solar power manufacturing), 3.4%; IVG Immobilien (real estate), 3.2%; United Internet (Internet service provider), 3.1%; and Software (software), 3.0%.

New Germany Fund sells for a 15% discount from the current value of its assets.

New Germany Fund is a buy.

TEMPLETON EMERGING MARKETS FUND $20.55 (New York symbol EMF; CWA Fund Rating: Speculative) is a closed-end fund that invests in equities from emerging economies. The fund’s manager is Franklin Templeton.

Templeton Emerging Market Fund provides broad geographic diversification. Although volatile, it provides access to fast-growing economies such as Brazil, China, India and others.

The $418.1 million fund’s regional allocation is Asia (58.9%), Europe (17.2%) and Latin America (23.9%).

Asian country allocations are China (16.1%), Thailand (8.4%), Turkey (8.2%), South Korea (7.9%), India (7.0%), Taiwan (3.9%), Hong Kong (3.0%), Indonesia (1.6%) and Pakistan (2.4%), Europe comprises Russia (9.8%), Poland (2.7%), Hungary (1.8%), Austria (1.5%) and Sweden (1.4%). Latin America includes Brazil (21.4%) and Mexico (2.5%).

Templeton Emerging Market Fund’s top holdings are Petrobras (Brazilian energy), 7.6%; Cia Vale Do Rio Doce (Brazil-based metals and mining), 6.6%; Aluminium Corp. of China at 4.6%; Petrochina (Chinese oil & gas), 4.1%; Akbank (Turkish bank), 3.4%; Banco Bradesco (Brazilian bank), 3.0%; Norilsk Nickel (Russian metals and mining), 2.9%; Sesa Goa (Indian iron ore mining), 2.7%; Gazprom (Russian gas utility), 2.7%; and CNOOC Limited (Chinese oil & gas), 2.6%.

Templeton Emerging Markets Fund sells for a 9% discount from the current value of its assets.

Templeton Emerging Markets Fund is a buy.