What Frank Trotter is Buying Now
By Dr. Steve Sjuggerud
September 28, 2007
"Frank... you're a big shot at a multibillion-dollar bank... what do you think of this idea?"
Six weeks ago, I asked Everbank.com founder Frank Trotter to punch holes in my latest investment idea...
(I can't be an expert in every field, of course. So I try to have good contacts, like Frank, to help me when I have an idea in their area of expertise.)
I told Frank my idea... I wanted to take advantage of the big banks temporarily losing their minds, causing the credit markets to freeze up.
So I told Frank I wanted to recommend closed-end funds that hold "senior secured loans." (I wrote all about these in the September 17 DailyWealth).
In mid-August, these things were in freefall. I thought they were cheap... but I wanted to be sure I wasn't missing something...
So I called Frank. He said I wasn't missing anything. It was a great idea. He wished he could buy those small closed-end funds for his bank. But they're too small for him.
Fast forward to today...
I had dinner last night with Frank, who was visiting from his home in St. Louis. I asked him about senior secured loans again. I was concerned the market itself wasn't improving fast enough. We've picked up some dividends, but the prices haven't gone up yet.
Frank was confident that a few major players are about to come out with big funds with the sole purpose of scooping up these types of secured loans. Frank still agrees with me and thinks the idea is a good one.
Two weeks ago, I mentioned one of these funds to you. The Eaton Vance Senior Income Trust (EVF). It's still trading at a 7% discount to its net asset value and still paying out a huge 8% dividend.
A number of funds offer similar discounts to their net asset values and dividend payment. To research the most attractive ones, you can go to www.etfconnect.com. Click on "Find a Fund," and then go to the "Closed-End Fund" drop-down box for "Loan Participation Funds." You'll find a table that lists them with their yields and discounts.
If Frank Trotter is right and big institutions come in and start scooping up the loans, then we have more gains to come in these safe funds, like EVF and the ones I recommended to my paid subscribers. If you're not on board yet, you ought to check out the closed-end funds specializing in senior secured loans...
Good investing,
Steve
P.S. I like Frank. Yesterday afternoon, he gave me a call. We only had dinner plans. But he was early. "Hey Steve, it's the incoming tide. I'm 15 minutes away from you. I'm here for the surfing lesson you promised me." I doubt there are many St. Louis men in their mid-50s that want to try surfing for the first time. Yesterday, Frank Trotter did. He succeeded too! He stood up. He probably traveled 30-40 yards on his longest ride. Go Frank! Sorry no photos... this time... But he says he'll try it again... We'll get the photographic evidence then! Learn more about Frank's business at www.everbank.com.
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