OT:Ping Scott: Regarding DWEIX

bee

Hi Scott,

I did a little screening of my energy holding VDE and compared it your DWEIX. On a three year basis (since DWEIX is only three years old) these two funds have performed very close to one another ranking 17th and 18th using Bloomberg's US fund Ranking tool.

bloomberg tool here

Interestingly, the following CEFs (Closed End Funds) all seem to provide a smoother ride over the last three years. Had you considered any of these, or others, before settling on DWEIX. Just wonder what your thoughts are in this space?

Below are two charts comparing DWEIX to a number of CEFs and then, comparing DWEIX to two mutual funds; VGENX and ICPAX. DWEIX has performed nicely.

scott

Thank you bee for your comments and charts. The Integrity fund is pretty interesting.

My view with DWEIX (and maybe ENY, but I haven't gone there yet - ENY is the Canadian Energy Income ETF - that has, to use an oil term, tanked - but has started to come back) is that DWEIX is largely Canadian oil companies. What the theme is, in my opinion, is oil/energy in a politically stable country in a time of increasing geopolitical tension. An aspect of China's CNOOC buying Canada's Nexen was CNOOC's desire to diversify into energy assets in a more politically stable country. I tend to think that, if geopolitical tensions continue, there will be further interest in Canada's resources.

DWEIX will never be a large position. It's a smallish bet on increasing interest in Canada's resource companies, some of which have definitely not done well - for a company specific example, Canadian Natural Resources (CNQ), which has been a downer for funds like FPA Crescent and Wintergreen. If it takes a while to pay off, it's a small bet and it provides a decent income stream - I think it's a matter of undervalued real assets with a lot of the Canadian companies.

bee

Reply to @scott:

Here's ENY included in the mix...I like FEN for its smoother ride. FEN is mostly US Energy companies.
Top 25 holdings:
FEN

scott

Yeah, if I was going for energy in general, I like SMF, which has the ability to hedge. The Tortoise and Kayne Anderson funds you mention above are also very good (as I think most of the offerings from both are - TTO is particularly unusual in that it's a private MLP fund that is in the process of turning into an infrastructure REIT. Last I looked, it was trading quite a bit under book value. I don't own it currently, but my theory was that it traded at a high discount to book value because it was largely a private equity fund; if it were to become an infrastructure REIT - which is taking a while - that discount may go away. Or may not, but that was a theory.)

The Canadian thing is more a belief/small bet that many Canadian energy co's are undervalued and may gain greater interest of there is continued (or elevated) geopolitical tensions.

I don't own SMF at the moment (I'd consider it if the premium came off), but I do like that MLP fund, and I will note that I did write the fund briefly once and the manager wrote back. They also have detailed, informative conference calls.