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Douglas Albo
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Registered Investment Advisor. Prior experience includes 12-years as a Vice-President, Financial Advisor at Smith Barney and Morgan Stanley.
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Capital Income Management, LLC
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  • Equity CEFs: QQQX Back To Buy Valuation

    I think you can start buying or adding to the Nuveen NASDAQ 100 Dynamic Overwrite fund (NASDAQ:QQQX), $18.78 market price, $19.92 NAV, -6.2% discount, 7.5% current market yield, now that its dropped to a roughly -7% discount to its NAV if this holds up today.

    QQQX's benchmark, the PowerShares QQQ Trust (NASDAQ:QQQ) up 1.2% today while QQQ is up only 0.50%. Now, QQQX won't capture all of the upside of QQQ since it is an option income fund, but QQQX's NAV is also more defensive than QQQ and will hold up better in a down market. For example, QQQX's NAV is up 0.3% so far YTD whereas QQQ is down -0.4% YTD through February 9th.

    That's the NAV performance. But the opportunity is in QQQX's market price which has been declining even while its NAV is outperforming its benchmark. It wasn't that long ago that QQQX was trading at a premium valuation in the months after the announcement last year to merge JLA shareholders into QQQX. What's obviously happening now is an overhang of JLA shareholders who are reducing their positions.

    This overhang of sellers is shown in QQQX's widening Premium/Discount chart since it started trading as the merged QQQX/JLA fund on December 22nd.

    (click to enlarge)

    However, if you were able to go back further, QQQX was trading as high as a 7% premium as JLA shareholders, who had shorted QQQX as an arbitrage to lock in QQQX's superior valuation, scrambled to cover before the actual merger took place. I wouldn't be surprised if it's the same investors selling their converted JLA shares now at a -7% discount!

    In any event, I think this is a good entry point into QQQX especially when you consider that QQQ and QQQX have historically mirrored eachother.

    (click to enlarge)Note: Shows 1-year graph of QQQ and QQQX. Does not include distributions.

    Tags: QQQX, QQQ
    Feb 10 2:23 PM | Link | 5 Comments
  • Equity CEFs: Buy Alert On ETY

    I would be buying the Eaton Vance Tax-Managed Diversified Equity Income fund (NYSE:ETY) here below $11.00. With a $12.18 NAV and holding up better at the NAV level so far this year, down only -0.8% compared to the S&P 500 down -1.7% (thru 1/13), ETY has been a great turn around story over the past few years after overpaying its distribution for a long time and losing a lot of NAV prior to 2012.

    ETY is one of Eaton Vance's more volatile option-income CEFs because it owns a lot of information technology stocks. In addition, ETY sells S&P 500 index options against only 47% of the value of its large cap, mostly US stock based portfolio. That a fairly low coverage and gives ETY a lot of S&P 500 upside capture while still offering some defensive measures on the downside. In 2014, ETY's NAV was up 8.9% on a total return basis while offering a very generous 9.2% current market yield paid monthly.

    ETY's market price can be quite volatile but when looking at the top 10 holdings of ETY currently (OTC:APPL), (NASDAQ:GOOG), (NYSE:MO), (NYSE:MRK), (NASDAQ:AMZN), (NASDAQ:QCOM), (NYSE:SPG), (NASDAQ:COST), (NYSE:STZ) and (NYSE:JPM), half of them are up (green) today with a market down over 300 points and yet ETY's market price is following the market lower and then some, down -2.2% at $10.93 currently.

    Now, this only represents a moment in one day of trading, but this is what you look for in these funds. ETY might be pushing a -9% discount after today if this holds up. That means you can get a 9.2% market yield paid monthly for a fund that only has to cover an 8.4% NAV yield.

    Then consider that ETY has had better total return NAV performance over the past 3-years than two of Eaton Vance's more popular option income CEFs, ETV & ETB, both of which trade typically at slight discounts to even premium market prices at times.

    I would be a buyer of ETY here.

    Jan 14 1:53 PM | Link | 9 Comments
  • Equity CEFs: Nuveen NASDAQ Premium Income & Growth Fund Informal Poll

    I'm conducting an informal poll for any shareholders of the Nuveen NASDAQ Premium Income & Growth fund (NASDAQ:QQQX) to see how, or if they voted on the proposed restructuring and merger with the Nuveen Equity Premium Advantage fund (JLA).

    If you are a shareholder of QQQX, received proxy/voting materials and don't mind sharing such information, could you click on the "Send Message" box to the left and let me know how or if you voted? I will then let readers know of the results if I get any responses (your username and any other information will be strictly confidential and deleted after any results).

    We should know shortly after the shareholder meeting next week on Monday, November 17th if a majority decision has been reached on the restructurings/mergers or if there is a delay once again. The QQQX/JLA is the only restructuring/merger which seems to be having this level of drama due to the arbitrage spread between the funds.

    For more information on all of the Nuveen equity-option CEF restructurings, go to this link.

    Tags: QQQX, JLA
    Nov 12 12:40 PM | Link | Comment!
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