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Douglas Albo

 
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  • Equity CEFs: The First Cut Is The Deepest (Part II) [View article]
    Both of you need to step back and understand how these funds work. CEFs are yield oriented investments. You need to add back the distributions to see what the total return has been. In many cases, the total return for these funds is much better than their correlated indexes.

    You also need to differentiate between the market price performance and the NAV performance. The NAV performance is the true apples-to-apples comparison with a fund's benchmark. In EXG's case the total return NAV performance from inception in 2007 has been -0.05% ($10.31 current NAV + $8.66 total distributions - $19.06 inception NAV divided by $19.06). That is significantly better than EFA and IEV two of the most popular international ETFs down around -20% over the same period though the S&P 500 is up 9.2%. Blended together and EXG's NAV has outperformed.

    On a market price basis, EXG doesn't look as good, as I point out in the article, but THAT is where the opportunity is. On a market price basis, EXG is down -12.9% ($8.76 current price + $8.66 total distributions - $20 inception price divided by $20), still much better than EFA and IEV. But the whole point of the article is to show how an outperforming fund at the NAV level gives an opportunity for investors to pick up a fund at over a -15% discount ($10.31 NAV vs. $8.76 market price) and an 11.1% yield. Does that make more sense?
    Sep 26 09:28 AM | 1 Like Like |Link to Comment
  • Equity CEFs: The First Cut Is The Deepest (Part II) [View article]
    You're welcome. Sounds like you've learned an important lesson in investing in CEFs. Buy at large discounts when no one else wants them and sell at premiums when they get overextended.
    Sep 25 11:29 AM | Likes Like |Link to Comment
  • Equity CEFs: The First Cut Is The Deepest (Part II) [View article]
    This article discusses only global funds. Eaton Vance has two S&P 500 related funds, ETB & ETV, that have outperformed the S&P 500 on a total return basis. Plus, your distributions are mostly ROC, which is an advantage. ETB & ETV sell a high 95% option coverage on their US stock based portfolios and thus are more defensive, i.e. their NAVs will underperform the S&P 500 in strong up markets and will outperform the S&P 500 in flat or down markets. Overall, they have outperformed the S&P 500 from their inceptions.
    Sep 25 11:19 AM | 1 Like Like |Link to Comment
  • Equity CEFs: The First Cut Is The Deepest (Part II) [View article]
    You won't hear me say anything negative about ETW, I've owned it for a long time. It's just that ETW is more defensive than EXG selling 95% option coverage on its global portfolio vs. 47% for EXG. EXG may not have the NASDAQ exposure as ETW, but that low option coverage means its NAV has more upside capture in a strong global market. ETW also just went ex-div whereas EXG's rotation comes up again in November.
    Sep 24 03:32 PM | Likes Like |Link to Comment
  • Equity CEFs: The First Cut Is The Deepest [View article]
    Thanks for your comment!
    Sep 18 08:14 AM | Likes Like |Link to Comment
  • Equity CEFs: The First Cut Is The Deepest [View article]
    ETB has come a long ways in market price considering its NAV performance actually trails most of the other Eaton Vance option funds! Its a smaller fund so it can be more volatile. I've actually lightened up in ETB but I wouldn't be surprised if it got to a premium valuation with the strong uptrend its showing. I think ETV is a much better valuation here and goes ex-dividend next along with ETW. Both are similar to ETB in their high option coverage though ETW is global. EOS needs to show me a bit more umph in its NAV performance and I'm a bit disappointed that it hasn't kept up more with the NASDAQ , which is up 22% YTD. EOS is very tech heavy and with only 50% option coverage, really should be up more than the 14.2% total return on its NAV.

    I still prefer the leveraged funds, which are far outpacing the option-income funds this year. CHW is a gift here in my opinion. NAV up 16.6% YTD, -11.2% discount, 8.7% market yield paid monthly and over half its portfolio is in corporate, high yield and convertible bonds. How many pure leveraged corporate/high yield bond funds are even at discounts right now? Not many.

    CHW's sister fund, CSQ (more US based stocks whereas CHW is global stocks) keeps hitting new highs and is only at a -5.4% discount and yet CHW is the one with better NAV performance and a higher yield! Both raised distributions substantially in January.

    Sep 18 08:13 AM | 1 Like Like |Link to Comment
  • Equity CEFs: The First Cut Is The Deepest [View article]
    Thank you for your comment!
    Sep 18 07:50 AM | Likes Like |Link to Comment
  • Equity CEFs: The First Cut Is The Deepest [View article]
    I would be wary of IGD here. Though I picked it as one of my funds to own for 2012, I don't like the direction of its NAV. Up only 8.4% YTD, which is not very good considering how strong the overseas markets have been recently. Yes, it has a 10.9% market yield and yes, it pays monthly, but I don't think the distribution cuts are over for IGD.
    Sep 18 07:48 AM | Likes Like |Link to Comment
  • Equity CEFs: The First Cut Is The Deepest [View article]
    I generally don't cover fixed-income CEFs but I'll take a look at it. Obviously, it has done very well riding on the back of a strong muni market. Reminds me a bit of a low-volatility PGP, which also has a fixed-income portfolio (non-muni) but instead of selling options, goes out and buys long S&P 500 e-mini futures. Also has done extremely well though also trades at a 65% premium! Thanks for your comment.
    Sep 18 07:38 AM | Likes Like |Link to Comment
  • If Bill Clinton Gave A Speech On Fiscal Responsibility In Equity CEFs [View article]
    Hedging long positions with short ones has had mixed results this year. For example, one would think an arbitrage between the Alpine funds AGD and AOD would be an obvious winner but nothing seems to change the valuation spread between these two funds. The NAV graphs are essentially the same (though supposedly one is more global than the other) and yet AGD (which is actually the global one) trades at a 9%-10% premium while AOD suffers a -7% discount with a 200 bp higher yield! Why is that? Both funds have had horrible NAV performance over the years and both will have to cut their distributions eventually but it still should be a strategy that works since AGD has a lot further to fall. So far, the spread has not narrowed much even though it should.

    You have to be nimble with shorts and hedges with CEFs. Often times, these funds will get a bounce on their ex-dividend date because of reinvestment programs or because investors may have limit orders and don't realize that funds are reduced by the ex-dividend. This works best with quarterly pay funds that have a larger price reduction and won't pay again for 3-months. JTD (which I love BTW) is a good example. Shorted on its ex-div date 2-days ago at $14.52, which was actually up when you consider the fund was reduced by the $0.26 distribution and by the next day, the fund was down to $14.25 or so as investors who had locked in the distribution sold. I would probably have held onto the short for a longer period as a hedge but in this strong market, forget about it.
    Sep 14 10:07 AM | Likes Like |Link to Comment
  • If Bill Clinton Gave A Speech On Fiscal Responsibility In Equity CEFs [View article]
    Yeah, I'm out of BGY once it made a run back up after the cut. Purely international fund with an 8.9% yield now. I can get that yield in a leveraged global fund like CHW which should far outperform BGY in an up market. BlackRock option-income funds in 2012 have become the Eaton Vance option-income funds of 2010-2011. Though I think the cuts for BGY are over, I much prefer the Eaton Vance funds now which have really come on. BGY is ex-dividend today 9/12.
    Sep 12 07:38 AM | Likes Like |Link to Comment
  • If Bill Clinton Gave A Speech On Fiscal Responsibility In Equity CEFs [View article]
    My integrity? Maybe you should be directing that question to the sponsors of these funds who lure investors in with distributions and yields they know they can't support. I follow ALL of the higher yielding equity CEFs and perform short and long term analysis on virtually all of them so I'm not just randomly picking on funds to short. I know which ones are operating in the best interest of investors and which ones are not.

    Oh, and the facts changed quite a bit since my last article. NAI cut its distribution substantially which is exactly what I predicted.
    Sep 10 07:42 PM | 5 Likes Like |Link to Comment
  • If Bill Clinton Gave A Speech On Fiscal Responsibility In Equity CEFs [View article]
    Actually 3 articles in the last month. Don't sell me short!!

    Yes, in case readers aren't aware, we're required to disclose that information and Seeking Alpha puts additional disclosures at the bottom of the article...

    Additional disclosure: Short NAI, AGD & EOD

    As for the "objectivity" and/or completeness of my analysis, you're welcome to take the other side and add something positive to NAI, AGD or EOD if you'd like. I'll stand by my analysis on these funds and every fund I've written about, positive or negative. I think you'll find I have been right a vast majority of the time.

    But as it turns out, so far I am wrong on NAI, AGD & EOD in this strong market environment, though I have been right on shorting these funds before and I'm pretty confident I will be right this time as well. Just so you know, I use shorts more as hedges to my long CEFs.
    Sep 10 02:30 PM | 2 Likes Like |Link to Comment
  • If Bill Clinton Gave A Speech On Fiscal Responsibility In Equity CEFs [View article]
    Thank you! I had a lot of fun writing it!
    Sep 10 12:23 PM | Likes Like |Link to Comment
  • 1565: What Will It Take To Make The Old S&P 500 Highs? [View article]
    We're essentially already at all time highs as measured by the S&P 500 ETF...SPY. It always amazes me that index comparisons don't include dividends whereas stocks, ETFs, CEFs and mutual funds do when calculating total return.

    Graph the S&P 500 with SPY. Exactly the same. Then consider SPY pays dividends while the S&P 500 is assumed not to. So today's SPY at 144.33 would be worth 155.66 if you added back the 11.33 in total dividends since October, 2007.

    Do it on a reinvested basis, and we're at all-time highs.
    Sep 9 02:01 PM | 2 Likes Like |Link to Comment
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