Picking The Best Option-Income Closed End Fund [View article]
Yes, total return charts and tables you have to put together yourself. It certainly changes the performance picture quite a bit. Some funds are doing much better than they appear while others are doing worse. I also don't really pay much attention to the market price performance, which is more of a popularity contest among investors. NAV total return is the true test of performance but I admit, for the past year or so, nobody seems to care much about NAV performance.
Picking The Best Option-Income Closed End Fund [View article]
The chart is very misleading unless you add back the distributions over the years. Otherwise, you're not comparing total returns.
In addition, these are the market price graphs, not NAV graphs. The NAVs plus distributions is a much more accurate total return to compare against the S&P 500 than the market prices.
How about a healthcare Closed-End fund (CEF)? I don't think there is a better opportunity than the Gabelli Healthcare and WellnessRx fund (GRX). GRX has one of the best NAV performances YTD and since inception of all CEFs and yet trades at one of the widest discounts, -15%. Big reason for the historic discount was because it didn't offer a dividend yield for the first 5 years and most investors get into CEFs because of the yield. But just this past March, GRX initiated a $0.10/share per quarter dividend, or about 4.9% annualized market yield. That's modest for a CEF, but I see this increasing.
GRX also uses about 30% leverage so it can turbo-charge its returns during strong markets. NAV is up over 14% YTD. The leverage also means it has a high total expense ratio at about 2.2%, but I believe that's the price you pay for an actively managed Gabelli CEF, many of which trade at hefty premiums.
Is Morningstar Missing Out On The Best Performing Option-Income CEFs? [View article]
Depends on where you see the market going. ETG and EVT are leveraged and will do much better in a strong market whereas option-income funds will generally hold up better in a flat to down market. Now I'm talking about the NAV of the funds. The market prices can do whatever they want and sometimes, ETG and EVT will outperform the option-income funds even on heavy down days. But if we go into a prolonged negative environment, ETV, ETB & ETW should hold up the best on an NAV and market price basis.
Is Morningstar Missing Out On The Best Performing Option-Income CEFs? [View article]
ETB & ETW are more defensive than EOI or EOS because they sell options on about 95% of their portfolio value vs. about 50% for EOI and EOS. ETB and ETW also use index options whereas EOI and EOS use individual stock options. The theory is that individual stock options will have more premium than indexes because they are typically more volatile but it also puts more pressure on the fund managers to manage the portfolio and options overlay more effectively. For example, AAPL is a top holding in all of these funds but trying to sell individual options on AAPL stock would have been a nightmare over the past year compared to selling NASDAQ 100 or S&P 500 options.
Is Morningstar Missing Out On The Best Performing Option-Income CEFs? [View article]
Thanks everybody for your comments. I must say I was borderline shocked with all of the support!
I did receive an email from Morningstar wanting to clarify a couple points. 1). They did not go negative on ETJ until March of 2012, not November of 2011. To me, that makes them look even more behind the curve, but they wanted me to include that. 2). They are not negative on ETV and have the fund at a bronze rating, which is 1 of 3 positive ratings, and 3). They have EXG at a neutral rating, which is neither positive or negative.
Equity CEFs: The High Cost Of High Distributions [View article]
I'm more long BGY than short NAI. I just starting shorting a little NAI and whether I hold through the ex-div date depends on what the declaration is next week by Allianz. In CEFs, some funds are trades and some funds I hold onto. NAI is more of a trade.
Equity CEFs: The High Cost Of High Distributions [View article]
Good point. Let's take a look at Undistributed Net Investment Income (UNII). Though for option-income funds, UNII is generally not applicable since most of their income comes from options and not portfolio dividends and interest...still NAI has one of the worst UNII's I've ever seen. According to http://bit.ly/NmGadx NAI's UNII was -$0.4433 per share as of its semi-annual report dated 8/31/2011.
And I'm sure things haven't improved much from a year ago either as NAI's NAV was around $12 and now its $9.52 after paying $1.60 in distributions over the past year.
Equity CEFs: The High Cost Of High Distributions [View article]
It is frankly incredible to me that some institutional investor or market maker would step into a fund like this and not see the potential downside. It really makes me wonder how much manipulation goes on with these funds since there is no justification for NAI to be even close to $11 with an NAV so depressed at $9.52. Could be a short covering as well but these funds have become so counter-intuitive that I don't think 99% of investors even bother to look at the NAV.
Equity CEFs: A New Utility CEF At An Attractive Discount [View article]
My tables and analysis always lists management fees and I always take them into account. BUI is just too new to show them yet. When a semi-annual or annual report comes out, then we'll know what their expense ratio is. One thing is for sure, the total expense ratio for BUI will be alot less than the leveraged utility funds. Probably around 1%,
Equity CEFs: A New Utility CEF At An Attractive Discount [View article]
Thanks for your comment. I look at PDT as more fixed-income oriented than BUI with 58% of its portfolio in preferreds. That 33% leverage is going to make PDT more risky than you think and more interest rate sensitive as well.
China: Crashing Economic Data Creates Great Investment Opportunity [View article]
And this is coming from someone named gaseseses? I actually liked the article very much and I think the author is right on. Grammar is second to content in my opinion.
ADX Vs. GUT: Fundamental Analysis Isn't Ideal For CEF Share Price Valuation [View article]
Good article, Joe. We can point out the valuation differences until we're blue in the face but until there are major distribution cuts in these funds (and there will be eventually), investors won't realize the bloated funds they are invested in.
Most of my analysis centers on NAV total return performance and NAV yields. Those are the pillars of fund sustainability in my opinion and often times its the funds with the strongest pillars that trade at the widest discounts. I don't even try to analyze market price performances because its nothing but a popularity contest.
Equity Closed-End Funds: When Opportunity Pounds On The Door [View article]
Several of the Gabelli funds have NAV distribution policies where the fund will distribute up to 10% of the NAV each year. None of the funds are earning close to that percentage in dividends/interest so obviously, the funds have to make it up via appreciation of their leveraged portfolios. That's the risk you take with these funds and that's why I said these are bull market funds. If GRX ever came out with a 8%-10% distribution policy, it would shoot up. Of course, the minute I write about it, it drops like a rock!
Equity Closed-End Funds: When Opportunity Pounds On The Door [View article]
Well thank you for your analysis. You seem focused on the portfolio holdings, the conflicts of interest Mr. Gabelli and GAMCO may have and the preferred share debt. I'm not going to comment on the first two since I don't believe Mr. Gabelli or the funds that bear his name would have prospered for so long if he had ulterior motives or didn't look out for shareholder interests. This is from GRX's recent Annual Report...
"Mr. Gabelli’s incentive based, variable compensation structure and dollar amount have been fully disclosed each year since April of 2000 in the annual proxy statement for GAMCO Investors, Inc. (NYSE:GBL). Mr. Gabelli receives no base salary, no annual bonus, and no stock options. As founder and portfolio manager of The Gabelli Healthcare & WellnessRx Trust, Mr. Gabelli received $48,786 in calendar year 2010. For the Fund’s first twelve months of operation starting in June 2007, Mr. Gabelli received less than $45,000. Mario J. Gabelli and various entities he is deemed to control owned 178,027 common shares of the Fund with a total value of $1,271,111, as of December 31, 2011. Mr. Gabelli may not have one hundred percent pecuniary interest in some of the entities he is deemed to control."
Now I do agree that the preferred share debt that most of the Gabelli funds use is not the most effective form of financing and is worth looking into more. Thanks for bringing that up!
Picking The Best Option-Income Closed End Fund [View article]
Picking The Best Option-Income Closed End Fund [View article]
In addition, these are the market price graphs, not NAV graphs. The NAVs plus distributions is a much more accurate total return to compare against the S&P 500 than the market prices.
Top 10 Healthcare ETFs [View article]
GRX also uses about 30% leverage so it can turbo-charge its returns during strong markets. NAV is up over 14% YTD. The leverage also means it has a high total expense ratio at about 2.2%, but I believe that's the price you pay for an actively managed Gabelli CEF, many of which trade at hefty premiums.
Is Morningstar Missing Out On The Best Performing Option-Income CEFs? [View article]
Is Morningstar Missing Out On The Best Performing Option-Income CEFs? [View article]
Is Morningstar Missing Out On The Best Performing Option-Income CEFs? [View article]
I did receive an email from Morningstar wanting to clarify a couple points. 1). They did not go negative on ETJ until March of 2012, not November of 2011. To me, that makes them look even more behind the curve, but they wanted me to include that. 2). They are not negative on ETV and have the fund at a bronze rating, which is 1 of 3 positive ratings, and 3). They have EXG at a neutral rating, which is neither positive or negative.
Equity CEFs: The High Cost Of High Distributions [View article]
Equity CEFs: The High Cost Of High Distributions [View article]
And I'm sure things haven't improved much from a year ago either as NAI's NAV was around $12 and now its $9.52 after paying $1.60 in distributions over the past year.
Equity CEFs: The High Cost Of High Distributions [View article]
Equity CEFs: A New Utility CEF At An Attractive Discount [View article]
Equity CEFs: A New Utility CEF At An Attractive Discount [View article]
China: Crashing Economic Data Creates Great Investment Opportunity [View article]
ADX Vs. GUT: Fundamental Analysis Isn't Ideal For CEF Share Price Valuation [View article]
Most of my analysis centers on NAV total return performance and NAV yields. Those are the pillars of fund sustainability in my opinion and often times its the funds with the strongest pillars that trade at the widest discounts. I don't even try to analyze market price performances because its nothing but a popularity contest.
Equity Closed-End Funds: When Opportunity Pounds On The Door [View article]
Equity Closed-End Funds: When Opportunity Pounds On The Door [View article]
"Mr. Gabelli’s incentive based, variable compensation structure and dollar amount have been fully disclosed each year since April of 2000 in the annual proxy statement for GAMCO Investors, Inc. (NYSE:GBL). Mr. Gabelli receives no base salary, no annual bonus, and no stock options. As founder and portfolio manager of The Gabelli Healthcare & WellnessRx Trust, Mr. Gabelli received $48,786 in calendar year 2010. For the Fund’s first twelve months of operation starting in June 2007, Mr. Gabelli received less than $45,000. Mario J. Gabelli and various entities he is deemed to control owned 178,027 common shares of the Fund with a total value of $1,271,111, as of December 31, 2011. Mr. Gabelli may not have one hundred percent pecuniary interest in some of the entities he is deemed to control."
Now I do agree that the preferred share debt that most of the Gabelli funds use is not the most effective form of financing and is worth looking into more. Thanks for bringing that up!