But if I told you GSV Capital is a major Facebook investor gapped up almost 50% in the last month, you’re probably a bit more interested. Right?
Closed-end funds are typically not the sexiest investment, since they are a bit arcane. Basically these investment vehicles offer a fixed number of shares to raise capital, then invest that capital accordingly. Shares are not created based on investor demand, so unlike conventional mutual funds or ETFs these instruments can often trade at a significant premium or discount to their net asset value.
As a small closed-end fund with a market cap of $170 million, GSVC wasn’t on many investors’ radar. But the underlying investments certainly were — not just Facebook stock, Groupon (GRPN) and Zynga (ZNGA) as well as Twitter and Dropbox.
As an early investor in non-public tech companies, GSV Capital got in on the ground floor for all of these picks — including Facebook stock even before its IPO.
That counted against it for a while, especially amid the negativity around Facebook stock last year, with the fund actually trading at a significant discount to its NAV as investors remained pessimistic on Facebook and other internet stocks. But decent Groupon earnings and Facebook earnings this month have sparked a breakout.
One investor who wasn’t surprised was Charles Sizemore, who touted GSV Capital way back in January right here on the The Slant.
Here’s what he had to say in his latest issue of the Sizemore Investment Letter now that he’s been validated in his call:
“The market noticed the big ‘free money’ sign hanging in front of GSV Capital’s (Nasdaq: GSVC) door. After languishing for all of 2013, GSV’s shares have risen by more than half in the past month. And I expect further gains of 50%-100% in the coming 12 months.
The good news is that GSV is still cheap. Its book value as of June 30 is estimated to be about $250 million. Its market cap, even after the run-up, is still just $227 million. So, GSV is trading at a discount to book of about 9%, and again, I expect that book value to be revised upward as investor enthusiasm grows for Twitter.
If you haven’t bought shares yet, it’s not too late. But do be careful. GSVC is a tiny company with a low average trading volume. Use a limit order and average into your position over the course of a few days or weeks.”
- Sizemore on GSVC back in January. (The Slant)
- Check out more insights from Charles Sizemore here. (Sizemore Letter)
- Facebook earnings details. (Slate)
- Going forward, we may see a mid-2014 Twitter IPO that affects this fund. (Inc.)
Jeff Reeves is the editor of InvestorPlace.com and the author of “The Frugal Investor’s Guide to Finding Great Stocks.” Write him at firstname.lastname@example.org or follow him on Twitter via @JeffReevesIP. As of this writing he did not own a position in any of the stocks named here.