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Michael Fabian

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  • Why DoubleLine Is Right On The Money [View article]
    I agree, Gundlach is using a small quality/credit balance within the MBS sleeve allocating to both non-agency and agency, but that's about it. However, like you pointed out EM credit is essentially a directional bet, he doesn't use IR, CDS, or currency hedges, so it will be interesting to see how the portfolio evolves over time. Or if he takes swift action to counteract volatility (my guess here is probably not since there is no liquidation requirement). I also couldn't agree more that DSL's underlying portfolio needs to be monitored closely. Not so much a "set and forget it" fund like some of his OE variants.

    DBL appears to me to be a DBLTX portfolio on steroids: long duration, and a good amount of inverse floaters, I/Os, and other agency derivatives.

    Thank you for the compliment on our website, we very much appreciate it!
    Feb 21 12:55 PM | Likes Like |Link to Comment
  • CEF Investors: Your Window Of Opportunity Is Beginning To Close [View article]
    You could be right, and you make very valid points. There are many underwater owners since these were two of the largest CEF IPOs in history. However, I still believe that through superior expertise in management, and large leverage ratios, they make great plays for a tightening credit environment. Meaning strong NAV performance could ultimately drag the market price higher, all the while collecting roughly an 8.5% yield on market price.

    They are both diversified amongst F/C HY corporates, F/R loans, and non-agency MBS. In addition to special situations: PCI has a distressed debt sleeve, while DSL has a larger EM debt sleeve. They are also not hedged to the extent PDI is, so it could make for an interesting 4th quarter.

    Thanks again for the comments.
    Oct 18 03:35 PM | 3 Likes Like |Link to Comment
  • CEF Investors: Your Window Of Opportunity Is Beginning To Close [View article]

    We were about 50% cash going into the CEF selloff, making sales in DBL, PKO, reductions in GOF, etc right about the time I wrote this article:

    I obviously underestimated how much rates would ultimately rise, however, like the article says, I focus on NAV performance vs. market price performance. As market prices slipped in relation to their TTM average Prem/Disc. NAVs held up relatively well, so I continued to add to positions during the correction. As of right now the portfolio is roughly 95% invested.

    Its nice to see some relief off the lows, and on a total return basis we have some healthy gains on most positions. I was actually expecting the treasury default would stir up more volatility, but it never came to pass (we did not sell any positions as a result of the treasury default fears). The two positions we continued to add to during the last week was DSL and PCI with proceeds from HNW. I tweet about certain additions like that, so join our twitter feed for additional play by play.
    Oct 18 03:00 PM | 2 Likes Like |Link to Comment
  • CEF Investors: Your Window Of Opportunity Is Beginning To Close [View article]
    I agree JustGiveMeDividends, I should have mentioned the recent bump in dividend for PDI from 0.177 to 0.191 cents per month (roughly 8% increase).

    The large special distribution will likely have to be made for the fund to avoid paying taxes on the additional income it has been receiving most of the year.

    Thank you for your comment.
    Oct 18 02:03 PM | 1 Like Like |Link to Comment
  • Interest Rates Have Stabilized: Why Aren't Discounts Narrowing? [View article]
    AWF isn't a fund that I cover to the extent I have read through their most recent filings and reports, so I would definitely point you in that direction to glean some more specifics on its portfolio.

    However, at first glance they have a consistent payout history, good UNII, and its currently trading at a healthy discount to its 12 month trailing average premium. All good characteristics.

    Just be sure that the manager's style aligns well with your personal income/total return goals. Thanks for the comment.
    Jul 30 12:53 PM | Likes Like |Link to Comment
  • Interest Rates Have Stabilized: Why Aren't Discounts Narrowing? [View article]
    NII stands for "Net Investment Income", which is basically a measure of what a portfolio is earning in income, in excess of it's expenses, but before taxes.

    UNII stands for "Undistributed Net Investment Income", which is what a portfolio earns in income in excess of its distributions to shareholders. A CEF that over-distributes could simply be returning capital to shareholders (ROC). It can get even more complicated when you start looking at distribution from capital gains, or income from derivatives etc.

    I try to avoid those funds that regularly return large amounts of capital to investors whenever possible, but there are always a few exceptions.
    Jul 25 11:43 AM | 1 Like Like |Link to Comment
  • Interest Rates Have Stabilized: Why Aren't Discounts Narrowing? [View article]
    Looking at their most recent filings, EHI is 95.4% U.S. Dollar denominated, and I believe HYI is 96% U.S. Dollar denominated.

    Looking at a chart of the U.S Dollar, its mostly unchanged on a 1 year basis, it certainly fell, then rallied, but no discernible trend.
    Jul 24 12:38 PM | 1 Like Like |Link to Comment
  • Interest Rates Have Risen: So Have Senior Loans Worked? [View article]

    For CEF's you usually need to get into the semi/annual reports to ascertain the aggregate reset of the entire portfolio.

    With ETFs and Mutual funds, the figure is typically posted quarterly. Furthermore, If you own a passively managed fund, you know it will remain static between rebalancing periods.

    Most every (highly diversified) portfolio I have analyzed is in that 45-60 day window. Thanks.
    Jul 17 11:01 AM | Likes Like |Link to Comment
  • 2 More Great Reasons To Invest In Closed-End Funds [View article]
    Not necessarily, That purely depends on the manager's risk management and/or hedging practices.

    Which is exactly my point, there is no "forced" transition. A manager can simply ride out the volatility without doing a thing. Volatility always comes and goes, the most damaging thing to portfolio performance is poor security selection, and buying or selling at an inopportune time.

    In addition, CEFs are typically allocated differently than OEFs. Using the above example, GOF's NAV outperformed GIOAX's NAV by a margin of over 4% YTD. Which can't only be attributable to leverage. When putting the two portfolios side-by-side, there are some real differences.
    Jul 2 07:14 PM | Likes Like |Link to Comment
  • 2 More Great Reasons To Invest In Closed-End Funds [View article]
    I agree, for those that arent interested in CEF's. However, there are some subtle differences in portfolio construction, and it only makes sense to purchase this fund on a load-waived basis.
    Jul 2 12:38 PM | Likes Like |Link to Comment
  • The Strategic Approach To Adding Preferred Stocks To Your Portfolio [View article]

    I was considering writing an article on Preferred CEFs. You can see some of my others on fixed income CEFs. Stay tuned, I'll write one next week. Thanks for your comment.

    all the best,
    Jun 14 11:09 AM | Likes Like |Link to Comment
  • Closed-End Fund Discounts Widen: So What Are You Buying? [View article]

    I would categorize the NAV pricing as very accurate. Going from memory, I recall PDI holding approximately 10% in Level 3 assets stated in their latest annual report issued in March. Naturally holding illiquid MBS isn't an issue for a CEF, since they will not be "forced" to sell at an inopportune time.

    I believe PIMCO likely marks these assets as close to on the money as is institutionally possible. Undercutting their market value could be considered tax evasion, and over pricing them would have the board of directors of the fund all over them. I believe they take their reputation and fiduciary responsibility very seriously in this regard.

    The real magic within this fund is Dan Ivascyn and his team's hedging strategies using pay-fixed swaps. He has done an amazing job balancing the credit, currency, and interest rate risk.

    Looks like some bottom feeders are already jumping on PDI's opening swoon.
    Jun 11 11:49 AM | 2 Likes Like |Link to Comment
  • 3 Lessons I've Learned From Investing In Closed-End Funds [View article]
    May 30 09:24 AM | Likes Like |Link to Comment
  • An Alternative Hedge Against Inflation [View article]

    It appears to me ILB only has roughly 23% in EM debt exposure, so I wouldn't classify it as an emerging market bond ETF. It also wasn't my intention to directly compare ILB and TIP side by side, but merely just to point out a different option for Inflation Linked Bonds.

    Like I mentioned in the article, I agree the lack of consistent dividends isn't something I'm attracted to, but I suppose it all works into total return in the end. Thanks for your comment!

    May 3 09:30 AM | Likes Like |Link to Comment
  • Sell Domestic And Go International For Higher Dividends [View article]
    You can take a look at the indicated yield I based my figures on at, the ETF provider. The 12 month trailing yield can be somewhat misleading because dividends from foreign companies can be lumpy, hence the reason I always use SEC yields since it makes for a more equal comparison.
    Apr 25 11:11 PM | 1 Like Like |Link to Comment