Closed-end Buys at a Big Discount

CANADIAN GENERAL INVESTMENT TRUST $10.01 (Toronto symbol: CGI) mainly invests in shares of Canadian companies. Its discount to its net asset value now stands at 28%. The trust now holds a high 19.6% of its assets in cash, up from just 1.4% a year earlier.

THIRD CANADIAN GENERAL INVESTMENT TRUST $20.86 (Toronto symbol: THD) holds 68% of its assets in units of Canadian General Investments. The rest of its holdings are mostly high-quality income trusts and stocks. The trust’s discount to its net asset value is 17%.

Since Third Canadian trades at a discount to its asset value, as does its main holding, Canadian General, you might say Third Canadian in effect trades at a “double discount” of approximately 34%. The total MER for Third Canadian, including the MER paid on the units of Canadian General it holds, is 1.9%, a bit above the 1.7% MER on Canadian General.

Third Canadian holds 4.7% of its assets in foreign stocks, while Canadian General holds only Canadian stocks.

Third Canadian has somewhat more potential than Canadian General Investments due to the double discount. But it involves somewhat more risk due to the quality of its holdings.

Canadian General Investments is a buy. If you can accept somewhat more risk, Third Canadian General Investment Trust is also a buy.