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mike57dk

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  • Comparing Dividend CEFs With ETFs: Which Are Better? [View article]
    Not to quibble ...but the portfolio turnover ( audited #s for AOD ) show as follows :
    2013 - 192% Fiscal year market Total return - +9.11%
    2012 - 310% -( 0.32%)
    2011 - 367% -(2.19% )
    2010 - 487% - (21.34%)
    2009 - 653% -+32.76%

    We are still waiting for the mid-year 2014 report from AOD to see the extent of their re-purchase plan ...am guessing that the guys who would impose a 1:2 Reverse split in Jan of 2014 and raise the dividend by 4.63% at the same time ...would NOT be bashful about snapping up shares with a 13% average discount ...so figure a heavy volume of buying each month.

    AOD management depends on the proceeds from their 192% annual portfolio turnover to pay the dividends ( some ROC ) and fund the share buy-backs ...in some ways this can obscure the financial health of the fund by illustrating significant unrealized gains on the share purchases of their own stock.

    I agree that the new portfolio managers in AOD are being more conservative than the predecessor ... but a near 200% annual portfolio turnover is still alarming ... by way of comparison; Richie Freeman over at Legg Mason typically posts a 2% portfolio turnover on his AGGRESSIVE growth fund for example ...while delivering +44% in 2013, +18% in 2012, +1.4% in 2011, +23% in 2010 and +32% in 2009 compared to AOD over the same time line.

    Both funds are essentially large cap aggressive growth funds ...perhaps extremes on both ends of the portfolio turnover spectrum.

    I am thinking that the poster who mentioned that " dividend capture " has been debunked was referring to those numbers ...where AOD missed the majority of the post Mar 2009 market recovery while most other funds did very well.

    Jul 24, 2014. 10:55 AM | Likes Like |Link to Comment
  • Comparing Dividend CEFs With ETFs: Which Are Better? [View article]
    Good morning John and thanks for the informative article from an analytic but perhaps short term perspective. ( numbers don't lie ) Here are some additional numbers to consider when considering AOD:

    AOD has perhaps the absolute worst reputation in the mutual fund industry having been incepted as one of the largest closed end offerings of all time ...with a feverish bull market dividend capture investment tactic that recorded portfolio turnover at 650% ...in an attempt to grab dividends ...then dump the stock a day or three later ...The SEC would call that " Selling Dividends " if a broker called to recommend that tactic it would be a violation of post 1929 securities regulation but incredibly ...its totally OK for a mutual fund to do it and have small investors buy the fund.
    AOD essentially got slaughtered in the bear markets of 2008 / 2009 ..racking up an audited $3 BILLION in capital loss carryforwards on a fund with a smidgen over $1 Billion in assets ...the market price ( split adjusted ) has fallen from $40 per share to roughly $9 where it stands today. ( performance was even worse as recently as Jan 2014 ) Audited returns based on market price being -0.32% in 2012, -2.19% in 2011, and -21.34% in 2010 ..( ouch ..and totally missing the market recovery post March 2009 )

    Under tremendous pressure from shareholders; Alpine management finally removed the "run & gun" portfolio manager and replaced her with two fairly young / smart / aggressive managers - Brian Hennessey and Joshua Duitz about 19 months ago.

    In their first 12 months on the job , and in conjunction with a strong market, they improved the NAV +17.60% ...with the fiscal year end 2013 delivering a + 9.11% total return versus the comparative index return of +23.89% over the same period. In other words ...AOD ended fiscal 2013 with a - 1,478 basis point market price underperformance against the MSCI world index. ( that's an ass-kicking by virtually any standard )

    But ...wait ...here is what the new managers have done in 2014 ....as you mention, the discount to NAV is -13.4% ...but it was -15.1% on 10/31/13 ..so some improvement there.
    1. They announced a REVERSE 1:2 stock split effective in Jan 2014 ...a wildly unpopular move that depressed their market performance significantly during the first quarter of 2014 ...but has yielded new investor interest.
    2. They INCREASED the monthly dividend by + 4.63% ...reversing the trend of constant dividend cuts the old management has inflicted on investors.
    3.They announced a 10% share buy-back plan after retiring 3,544,829 shares in fiscal 2013 ..roughly 295,000 per month ...and they are booking an average gain on those, accretive to investors, buybacks between 12-16% ...
    4. The new managers have abandoned the discredited dividend capture tactics and are now essentially a proxy for the S&P 500 index ...except at a 13% discount to market price ...holding mostly blue-chips and name brand stocks with a turnover of 192% versus 310% in 2012 ...( still eye popping but reflective of the new management change )
    5. They have DELIVERED an 11.2% total return YTD 2014 versus 9.08% for the S&P 500 ...Amazingly ...the YTD market performance of AOD is ALREADY better than the entire 2013, 2012, 2011, 2010 fiscal year total returns COMBINED ...so that is a good sign and start for the rookie portfolio managers.

    We started this note by stating that " numbers don't lie " ...and therefore, by most standards, AOD would and should be a PARIAH in the fund business ...The replacement of the portfolio manager with Brian & Joshua marked a new beginning for this fund ...NAV up over 20% since then, dividends up +4.63%, market performance up 11% YTD, share buyback plan removing 295,000 shares of common each month, Reverse 1:2 stock split in Jan 2014, new investment tactics reducing portfolio turnover significantly ...

    This was a " GUTS" move by Alpine to try and recover from the MASSIVE underperformance ...and reflective of the pressure on Alpine to do something / anything to help fix the fund performance ...

    I own and hold AOD ...having found the discount to NAV compelling back in March 2009 ...but the numbers versus the S&P index indicate that during that 5 year period, where I received a +14.70% average total return from AOD ...the S&P 500 index DELIVERED a +24.52% average annual total return over the same time line. ( 5.36 years and an average -982 basis point underperformance each and every year thru Friday... )

    Investors who purchased AOD on the IPO have a -40.25% Total return or -6.87% per year ...

    Those numbers should have been included in your article as historic yield is important ...but a managed fund that routinely posts a 1,000 basis point underperformance each and every year versus the unmanaged S&P 500 index should not be touted as a top performer ...It would be similar to saying that Brazil scored a goal on the German team in the final minutes of World Cup competition ...but neglecting to mention that The Germans had scored SEVEN earlier goals in the same game ...

    AOD is essentially, at its core, a RECOVERING ALCOHOLIC mutual fund story and they have done some fun and interesting things over the past 19 months of leadership ...but can they " stay on the wagon" and avoid the temptation of going back to the 400-600% portfolio turnover days to capture yield ?

    The numbers I want to see from AOD in 2014 :

    1. Pay the dividends ...( no cuts for any reason )
    2. Outperform the S&P 500 index by a measurable and significant amount
    3. Complete the 10% share buy-back
    4. Stay away from the giant / excessive portfolio turnover
    5. Earn the dividend distribution without inflicting too much ROC on investors.
    6. Continue to grow the NAV while reducing the discount to NAV.

    Summary - Its too early to put TOP PERFORMER and AOD in the same sentence ...but the trend has been favorable over the past 12 months ...

    Thanks again for the interesting article - Mike




    Jul 20, 2014. 01:59 PM | 3 Likes Like |Link to Comment
  • Tonix Approaching 100 Days Until BESTFIT Results [View article]
    Had always heard that there are at least seven ways to be Bullish or Bearish on a stock ...The top three Bullish tactics being :
    1. Long Call
    2. Short Put
    3. Buy shares ..

    So essentially the debate is which tactic is best for TNXP at this price ...but all are essentially BULLISH variants ...whichever " floats your boat" ....that fits your specific risk / financial profile and prior experience ...

    Am long the shares ...seemed the easiest, most convenient way to act on this investment idea ...I think the options chain was a very recent change / development for TNXP ...with a grand total of 137 CALL contracts outstanding thru three strike prices in December 2014 ...( according to WSJ this am ) ...That's not just thin volume ...that's tissue thin ...( one ply if you will ) ...and as a former options trader; B&H certainly understands that lots of bad things can easily happen ...such as no buyers when you really , really want to sell ...making the quoted option bid / ask more of a fantasy than a price where you can actually get an execution or worse.. a market execution far , far below the quoted price which is nothing more than a last trade history ...or a machine calculated number ...based on an algorithm, not trading based. ( ouch )

    In my opinion, and given the relatively low price of the stock , the approximate 10,000,000 total number of shares outstanding, heavily held by the insiders and about 1.3 million shares held by Technology Partners Fund VIII LP in Mill Valley, California, the best way own the future of TNXP ...is by simply buying the shares.

    But ...lets have some fun ...and ASSUME that the stock hits the $61 per share level suggested by Joe in this article ....and in November ....what do you think the December CALLS struck at $60 would be selling for ? My guess is that the huge volatility in driving the price upwards over $50 per share in the last 100 days ...and the 3-7 week time value remaining on the Dec 14 contracts would impute a BIG NUMBER ....$10 per contract ? $15 on what would be the latest pharma stock to explode upwards ....My point is that you can then SELL the covered calls expiring in Dec 14 ....probably get $15 per share or perhaps much more ...and when exercised ...your exit price would be effectively $75 per share ....or about a $63 per share profit assuming a $12 average purchase price ...that's not shabby either ....if the market price sags back to $40 per share ...close out the open covered call position ...count your money ...keep the underlying shares for another Covered write ...

    Lots of fun ways to make money ...IF... the market price goes up as Joe has forecasted ...There is no ONE RIGHT answer here ...just the one that fits you.

    Mike

    Jun 20, 2014. 04:00 PM | 4 Likes Like |Link to Comment
  • Cynapsus Therapeutics Shares Will Soar - Here's Why [View article]
    Thanks for the detailed article ...
    From a purely analytics viewpoint ...

    The concept of the SL formulation and preliminary testing looks promising ...but am a bit concerned ..they have about 39 million shares outstanding with warrants for approximately 21 million more and options to buy about 2.5 million more ...
    So ...when exercised ...about 60% more shares on the market ...and the company could conceivably raise about $12,000,000 if all 21 million were struck at $0.57 and subsequently exercised ...( just some guesswork ...but you get the idea )
    While not absolute ...the company is reporting that 125,000 or so warrants struck at $0.57 per share were exercised last month ...the implication being that many of these 21,000,000 stock warrants were priced at $0.57 per share ...hard to be 100% sure but with the stock recently trading at $0.40 ...and now at $0.90 ish in the market ..that would impute almost a +60% gain for these warrant holders to exercise and simply sell the shares ...while diluting the overall shares and reducing market value ...
    I understand that the company needs to raise cash ...an estimated $10,000,000 is required according to the one report I reviewed and your report mentions $16,000,000 will be required ... ...which is very likely to happen when a + 60% gain is to be had ...( $0.57 strike price to the current $0.90 market price = + 60% )
    That scenario will still leave them a bit short of your estimated funding requirement ...requiring more warrants ? secondary stock offerings ? or a loan ...What do you think they will do to fill any financial shortfall ?

    Also - Their Chief Scientist seems to have resigned ...after five years with the firm ..and after being an integral part of the process to develop this SL formulation ...That does NOT look good ...or feel right to me ...What is the company saying about that potential loss of critical technical talent ?

    Jason - as always ..enjoyed the descriptive detail in your articles ...Thx
    Feb 12, 2014. 10:39 AM | 1 Like Like |Link to Comment
  • Assessing Covered Call Closed-End Funds To Enhance Retirement Income [View article]
    Wow ...Thanks Brad for the kind words ...was taken by surprise ....lol

    I do in fact sell covered calls on a portion of my equity portfolio ....and have enjoyed using various option related strategies in the past ...sometimes a painful experience I do admit ...
    ETY is essentially SELLING INDEX CALLS ...as many as 10,000 contracts in a given month ....As you are aware ....so called " naked " Calls are potentially very hazardous and risky ...requiring a financial net worth far in excess of my ability to sustain ...( I also hope to keep the hair I have remaining ...lol )
    In 2013 ...we collected a + 28% Total return with ETY ....and I believe 2012 was around + 15% ...good work for a mutual fund ....

    I do manage to torment EV management with pesky questions from time to time ...and I believe they would like to see me " off-their-case" ...but that's not likely to happen for a while ...

    Regards - Mike
    Feb 9, 2014. 02:09 AM | 1 Like Like |Link to Comment
  • Assessing Covered Call Closed-End Funds To Enhance Retirement Income [View article]
    wkirk500 - Your earlier question was regarding the notifications of the dividend component estimates we received ...where the ROC portion was estimated at 92% ...and how that was seemingly at odds with the zero ROC component for the entire fiscal 2013 year.

    I attempted to explain that ...with supporting references / data from the 2013 audited year end report.

    I am not exactly sure how that gets me " back to the same place" as you suggest ...or how UNII and the Reg M significance need to be tackled ....( that sounds like a job for " Accounting Man " to paraphrase an old TV show ) ....and that is definitely NOT me.

    Love or Hate ETY and the Option Income funds ...they are doing some interesting and innovative things to help make the fund more attractive to investors ...doubtless there will be some consequences , both good and bad from these decisions ... and the undistributed net investment income and the tax regulations related to passing those gains from dividends and income thru to investors ..( Reg M ) will be a part of that ...lets see what the semi annual report contains ...

    Thx - Mike
    Feb 7, 2014. 11:52 AM | Likes Like |Link to Comment
  • Assessing Covered Call Closed-End Funds To Enhance Retirement Income [View article]
    Good am wkirk500 ...
    Yes ...I did also received that letter / notification from EV ESTIMATING that 92% of the Jan 2014 was thought to be ROC.
    EV had previously sent out monthly letters estimating that approximately 82% of the aggregate 2013 distribution was ROC ...
    I was reading the fiscal 2013 annual report when I noticed that the huge capital loss carryforward amount ( $500,000,000 ish ) had "disappeared" ...and was wondering how exactly they had made that happen from an accounting viewpoint. Page 18 of the annual report details the 2013 distribution as : $59,722.778 ordinary income and $ 104,673,449 long term capital gains ..with ZERO tax return of capital. ( 57% ordinary income / 43% long term gains )
    I went to the EV homepage and wrote out a long question to the customer service staff and was surprised when, a few hours later, a representative called me and went over the data in specific detail.
    First - He pointed out that the letters we shareholders had received regarding the ROC component of the fiscal year distributions were in fact mere 'estimates' and not fully audited statements to be used with the IRS.
    Secondly - he advised me that ETY management had made an "executive decision" back in the fall to essentially blow out their considerable unrealized capital gains in the portfolio and wash them against the carryforward losses ....
    Third - the monthly distributions from Nov & Dec 2013 would revert back to the earlier methodology of ROC and managed distribution of the dividends ...so we are back to the 92% ROC letter we recently received ...business as usual ...
    Fourth - I asked for the specific tax component of the fiscal 2013 distribution and he mentioned that we would be getting the detailed specifics in our 1099-DIV ...and when I suggested that 80% plus must therefore be considered capital gains instead of ROC ..he responded that LTCG was still " tax advantaged " as compared to ordinary income and the fund was well within its rights to re-characterize the estimated distributions made earlier.
    Summary - I spoke directly with the EV representative ...he was working with a ' talking points ' memorandum and seemed very prepared to deal with questions like mine that would arise from the audited / certified annual report ...They were ready for the questions ...and he even commented that he was surprised that more folks had not ,as yet, called ..the fact that they called me instead of simply e-mailing me back ...and they called within a few hours of my question is very interesting to me.
    My earlier comment was more of a review as to the aggressive steps ETY was taking to make the fund more popular ...switch to monthly dividends / share repurchase program / improving the NAV / and this dynamic decision to REALIZE essentially all of the unrealized capital gains in their portfolio to wash against the aggregate losses ...in one gigantic swoop ...I nearly jumped out of my chair when I saw the fund had a net realized gain of $560,378,480 in fiscal 2013 ( page 14 )
    But ....the annual report makes NO MENTION of this , what just has to be, a huge, decision process or the practical consequences of it ...just the accounting portion they were required by law to provide.
    I would hope that a portfolio manager's letter or at least the quarterly update report would contain some mention of it ....but ...so far ...not a word.
    Perhaps there were legal or HR considerations and other factors involved ....I like the use of those 2007 / 2008 capital losses before they started to expire in the years ahead ...its clever ...but it tends to obscure the "normal" performance of the fund in a solid market year ...netting out a plus 28% in calendar 2013 was very nice ...but now the question arises ..." have they essentially shot their load ?" ....pulled out all the stops and accounting gimmicks to make the fund more attractive ? They did improve the NAV 20.61% in 2013 ...and added a bit more than $120,688,000 in assets to the fund ...
    Just something to consider ...oh ...one more thing...the possibility that the EV rep was misinformed or mistaken ( or that I was - LOL ) ...is negated by the audited annual report ( page 18 ) which generated my written question in the first place ...we should be seeing our 1099-DIV forms in the next few weeks to further confirm ...
    Hope this helps explain / answer your question - I appreciate the interest ....
    Feb 6, 2014. 12:01 PM | 1 Like Like |Link to Comment
  • Assessing Covered Call Closed-End Funds To Enhance Retirement Income [View article]
    Just as a follow up on our earlier threads with a focus on Eaton Vance and ETY in specific ...
    I spoke with EV to question the fiscal 2013 distribution characterization from a tax viewpoint and was surprised to learn that 100% of the 2013 dividend will be defined as investment income / capital gain ...this despite their published quarterly estimates that 75-82% of the distribution was ROC.
    EV has essentially used up its massive capital loss carryforwards in one gigantic swoop ...over $500,000,000 ..
    Their calendar year 2013 total return performance is listed as + 28% and I believe that 2012 was + 15% making the fund's return market competitive ...
    We still have an approximate 9.5% discount to NAV ...a strong monthly dividend stream that annualizes at 9.5% and the reality that ETY management will be " retiring " 12-13 million additional shares in the fund in 2014 & 2015 ...at their discretion ...
    The fund reported earnings of $1.993 per share for fiscal 2013 ...by far their best year of the last five ...
    The fund has reduced the number of stocks in its portfolio to 130 ...Google, Apple Amazon, Merck, Canadian Pacific Railway compose almost 10% of the fund ...
    ETY management has made some strong / aggressive moves in the recent past ...switch to monthly distribution / share buy-back / reducing positions from 200 to 130 / reducing the option over write to 36% from 55% and has DELIVERED a stout investment performance ...while improving the NAV ...( small amount but still non-destructive ) ...Now they eliminate the ROC component of their 2013 distribution while eating up the capital loss carryforwards ...
    Remember the old PGA slogan ..." These guys are good " ....ETY management has stepped up and seems to be making " all the right moves " to benefit the shareholder ...
    Feb 5, 2014. 10:19 AM | Likes Like |Link to Comment
  • How To Trade The 8% Yielding Alpine Total Fund Before It Splits And Raises Its Payout [View article]
    The 2013 annual report detailed in the first paragraph of the manager's commentary how they have managed to grow the NAV , under the new management style, a robust +17% in fiscal 2013...The strong market was a major factor, no doubt...but I noted where the portfolio turnover had declined to 192% from 310% the previous year and way down from the outrageous 653% back in 2009.
    This would at least imply that the two new portfolio managers were adopting a very different tactical style of investing ...one that allows for some type of investment duration beyond 2-3 weeks ....or simply trying to ' Buy Dividends ' ...
    AOD also actually " made more than they paid " in 2013 ..with a $0.71 per share total from investments Vs a $0.41 per share in dividend distributions. That has not happened over the previous five years ....
    The reverse split is a BIG MOVE ...one sure to anger /annoy their long suffering investors but if we use the Citigroup template from a few years ago ...it can work out well for them in the long run ...( just have to survive the negative reviews and commentary for 5-6 months )
    Raising the dividend by 4% or so is smart ...so is the share buy-back plan which might have taken as many as 5,000,000 shares off the market by now ...
    The new management team is making some aggressive / strong moves ....looking to get some real pure performance ALPHA ...that will get them noticed and back on people's investment radar ...
    Its a "comeback" story for sure ...but they are off to a good start ...well worth following.
    Feb 4, 2014. 11:06 AM | Likes Like |Link to Comment
  • How To Trade The 8% Yielding Alpine Total Fund Before It Splits And Raises Its Payout [View article]
    I was first attracted to AOD back in March 2009 ...when Alpine management announced a large share re-purchase plan designed to get the massive 15% + discount to NAV reduced to a more manageable level ...back then they were sort of a "Run & Gun " fund looking to essentially buy dividends / dump the stock / buy more dividends ...then buy special dividends / dump the stock / repeat the process ...they had been crushed in the falling markets of 2008 and early 2009 ...
    So ..I very gingerly purchased 2,500 shares on 3/09/09 priced at $4.45 per share ...call it $11,126 invested.
    Since that time ..reinvested dividends have delivered 2,350 additional shares to my holding with a cost basis of $5.60 - call it $13,165 cost basis.
    The overall position is valued at $20,322 with an investment duration of 4 years 11 months ...or a $ 9,196 gain on an $11,126 investment - +82% or 16.5% per annum ...

    I anticipate getting $3,288 annual dividends in 2014 from AOD and incredibly ... I even have an unrealized ( 3,969 ) capital loss to offset other portfolio gains should I sell the shares.

    Ok ...Here is some interesting data from the 2013 Annual report ...( sounds familiar in many parts )

    1. They have installed new mangers effective December 12, 2012 - Brian Hennessey and Joshua Duitz and from the time they took control until 10/31/13 the NAV of AOD GREW +17.07% ...
    2.Alpine has been buying shares very aggressively and " retiring them " according to their annual report ....some 3,544,829 shares between Apr and Oct fiscal year end 2013 ...ballpark it at 440,000 shares per month ....so it may be possible that, as of this writing, Alpine has " retired" around 5,000,000 shares ...fewer shares ..better valuation for shareholders is the thinking.
    3. The Reverse 1:2 stock split ...ouch ...Investors HATE this ...and typically punish the company by dumping the shares over the next few months ...See Citigroup and Telephones De Mexico a few years back for an instructional on how shareholder value actually diminished post split ... It takes a while ...but...its like taking cod liver oil ...its good for you but its tastes so bad ....LOL
    4.AOD has over $3 billion in Capital Loss Carryforwards on the books ...to wash against future capital gains ...incredible but true ...so very little taxation will be passed thru to us from capital gains anyway. This could be important later ...
    5.The fund ACTUALLY made money in 2013 ...Their net investment income was $0.71 per share ...BY FAR ...their best year over the last five. They actually made more than they paid out ...( $0.41 distribution )
    6.The new managers reduced portfolio turnover to 192% ( and falling ) from 310% in 2012 ...and compared to the old ' Run & Gun ' days when it was 653% ....If you are flipping your portfolio 600% per year ...it hardly matters what you hold ...you don't have any time for capital appreciation ...no investment thesis ...no holding period ...lol
    7.They boosted their post-split dividend a little over 4% ...first RAISE in years ...lol ...and a good sign.
    8.The fund is BACK trading at a 15% ish discount to NAV ....hanging the " ON SALE " sign next to their stock symbol ...
    9. The fund distributes an 8% dividend paid monthly ...essentially " Dollar Cost Averaging " 12 times per year back into the fund ...when market price is lower ...we buy more shares ...when higher ...we buy fewer ...over time ...say FIVE YEARS and 60 dividend payments ...this could and SHOULD make a nice incentive for us ...

    Summary - New management ( about one year of being in charge ) where they have grown the NAV by 17% ....dividend increase ...always welcome ....solid financials in 2013 at least ...15% discount ...8% yield ....and a recent 1:2 reverse stock split ...ALMOST sure to erode the post split price even more in the weeks ahead ....
    Oh ...they have all but abandoned that whacky ' Buying Dividends ' approach ....( really good news as now ...they can manage money ...NOT TRADE )

    Really a FALLEN ANGEL ....but with a young / aggressive management team looking to prove themselves ....makes for an interesting story ...

    I would wait for the market price to erode a bit further ...let the yield move up to 8.5% or thereabouts ...Investors will see the results of the post split shares on their Jan end statements ...and will UNIVERSALLY HATE it ....they always do.

    Someone said they would not be surprised to see a $7.50 market price ....That would be optimal for us LONG investors ...but ...I expect to be ADDING shares incrementally below the $7.75 price tag ...

    We are literally getting the proverbial " Second Bite of the Apple " ...and hopefully the performance listed earlier ( from Mar 2009 ) will repeat itself ....

    Hope this proves helpful
    Feb 3, 2014. 09:23 PM | 1 Like Like |Link to Comment
  • Assessing Covered Call Closed-End Funds To Enhance Retirement Income [View article]
    My understanding is that EV fund management has , at its discretion, authorization to purchase 10% of the total outstanding shares ...and that they have thus far used that authority to remove about 2.5 million shares from the public market ...They started to report their buying activity on a monthly basis ...but now instead use their quarterly reports to advise on the progress ...My own very rough estimates place them with about 6-7 % of the funds shares that can be purchased ...so...the thinking is that EV management has a good way to go before running out of the 10% authorization ...ballpark numbers ....are 152 million shares when they stared the 10% buyback program ...so call 10% about 15 million shares ...and they have purchased 2.5 million thus far ...so plenty of room left ...and makes this a valid portion of the investment thesis to own ETY.
    I believe they started this program to help reduce the huge discount to NAV ...it was about 14-15% at the time ...and the program has helped ....
    EV management has been trashed on these funds ....they started out at $20 per share and got " whacked " down to the $8 range in the 2009 market crash ....they slashed the dividend 2-3 times as option premiums could NOT pace the distributions ...every time the market seemed to rally ...investors would then DUMP this turkey which showed on their monthly statements as the " Biggest Loser " ...
    EV management has reacted by going to a monthly dividend from the quarterly distribution ....initiated a 10% share buyback in the summer of 2013 ....and declared their commitment to reducing the huge discount to NAV ....their dividend cuts hurt them with investors ....but they always stated that a 10% annual dividend distribution was within reason ...as the price fell ...the annualized yield was increasing to 15-16% ...way out of common sense or reason for them to obtain ...the cuts were logical and well justified ...but anytime you slash dividends ...investors dump the shares ....
    ETY is essentially a " Fallen Angel " story ...and with the combination of the 10% share repurchase program / 10% ish discount to NAV / super duper low taxation / exemption from capital gains and NIIT taxation thru 2017 / monthly distributions and a portfolio of approximately 200 stocks ...all " Blue Chip " in caliber ....make this a compelling story ...
    Dec 6, 2013. 11:56 AM | 1 Like Like |Link to Comment
  • Assessing Covered Call Closed-End Funds To Enhance Retirement Income [View article]
    Very nice article on the so-called Option Income funds ...and a further point in their favor ( Eaton Vance funds anyway ) is the large / aggressive -on-going share re-purchase program ...Fund management is literally buying back shares each month ...and there remains about 6-7% of the total 10% repurchase authorization made in the late summer of 2013.
    EV management is booking a very nice profit on the re-purchase thus far ....
    EV management switched to a monthly distribution from the quarterly payment starting Jan 2013 ...this reduced the huge amount of dividend only " chicken hawks " who would swoop in claim the dividend ...then dump the shares ...creating huge volume and price swings in the market price ....
    ETY holds over $500,000,000 in capital loss carryforwards on their books from the 2009 market crash ....and can wash these losses against capital gains going forward for several years to come ...they just published their quarterly report detailing over $200,000,000 in Capital gains over the previous NINE months ....The net result will be ZERO capital gains taxation and ZERO to Ms Pelosi's 3.8% NIIT tax ....Our net out-of-pocket taxation on the roughly $1 per share in dividends paid by the fund in 2013 will be $0.04-0.05 per share ....
    It makes these funds very hard to ignore ....and for a strong investment thesis.
    Thanks for the comprehensive article on these funds ...
    Dec 4, 2013. 07:41 PM | 2 Likes Like |Link to Comment
  • Equity CEFs: The Insanity Of CEF Investors [View article]
    Reply tp papaone -

    Thanks for your comment and in reply to your question, Yes ...I would consider ETY as an investment source of monthly retirement income.

    Here are some quick bullet points in favor of the fund:

    1. Fund contains 121 individual stocks - mostly blue chips and 75% US corporations - no bonds or complicated wall street instruments that seem to fizz out unexpectedly.

    2. ETY is still on sale ...you are getting about a 10% discount with this market price ....it has been higher ...but 10% is not too shabby.

    3. ETY management just reported the results of their 10% share buy back thru Feb end ...They have purchased around 2,700,000 shares of the fund or 1.77% of the 10% authorized ...this has driven down the discount from 14% to the 10% level today ...along with the favorable markets of course ...they are booking a 14% GAIN on the transaction ...wow ...fewer shares in the market ...usually means higher prices for us ....it also shows that fund management is serious about making the fund attractive and interesting to new investors.

    4. We still collect monthly income that annualizes at 10% based on current pricing ...thats hard to pass up when compared to other more traditional income investments like CD's or muni bonds ...

    5. About 85% of the income paid out in the dividend distributions are non-taxable ...whereas ... interest income and standard dividend income are very taxable ....

    6. YES ...The cost basis of your investment is likely being reduced by the return of capital aspect ....but ... that just impacts your overall capital gains / loss calculation when you physically SELL the fund ...and with the market price rising slowly ...you may well have a capital gain ....several years from now when you sell out ...but not much of a tax headache now ....pay taxes LATER ...

    Best regards ...hope this helps
    Mar 11, 2013. 10:07 AM | Likes Like |Link to Comment
  • Equity CEFs: The Insanity Of CEF Investors [View article]
    By IRS and accounting rules, the $450,000,000 capital loss carryforwards will " expire " and become useless to ETY management .
    My contention has been that fund management could and should " wash " future capital gains against this large carryforward loss amount ...thus creating a flow of tax free / non cost basis adjusting income to holders of the fund.

    Instead ...ETY is boosting the amount of unrealized capital gains in the portfolio ....which certainly makes them look good ( on paper ) but forces us into a cost basis reduction as the fund returns principal to us each month ....when they could simply use capital gains ...

    Its an interesting tactic ....along with the switch to monthly dividends and the 10% share repurchase plan ....to make the fund all the more attractive to new investors ...

    Nothing particularly bad or wrong here ....and we will see the semi-annual report in mid-April which should detail the changes in the portfolio from November 2012 ....

    They are being very clever ....perhaps too much so ....and that has me concerned.

    Regards
    Mar 10, 2013. 11:12 AM | Likes Like |Link to Comment
  • Equity CEFs: The Insanity Of CEF Investors [View article]
    Good afternoon all ...

    I think the reality is that ETY, with a portfolio turnover of 30% in fiscal 2012, was simply pruning out the weaker holdings in the portfolio of about $1.6 Billion ...to create a net proceeds of approx $480,000,000. ( 30% of $1.6 billion )
    The fund has a managed distribution policy that requires an annual dividend distribution rquirement of around $150,000,000 ( ish ) ....and they get approx $15-17 million net after expenses to pay out as dividends ....leaving them with a " nut " of about $135,000,000 necessary to pay the annual dividend distribution.

    ETY stated in its audited annual report that its Unrealized Capital Gains in the portfolio had increased to about $250,000,000 and they still held about $450,000,000 in capital loss carryforwards on the books trhru 2018.

    So ...in a nutshell ...ETY greatly increased its unrealized capital gains in 2012 ....sold off thru portfolio turnover about $480 million in net proceeds ...and made the $1.00 + 2012 dividend distribution.

    Deductive reasoning indictates that this would lead to a Return of Capital from the principal invested ...since they didnt use any of the capital gains that could be offset by the huge amount of carryforward losses on the funds books....

    The $250 million in unrealized capital gains makes the books look very positive and a vast improvement over past years ....the NAV is slowly but steadily increasing ...and we still get a bit over a dollar a share discount to NAV ....

    It makes more sense in view of their recent campaign to improve the attractiveness of the fund .... share buyback ....switch to monthly dividends ....that EV fund management wants to show solid fundamentals and good performance of the underlying stocks held in the portfolio ....

    I am a bit concerned by EV's lack of transparency about the on-going share re-purchase plan and their seeming stubbornness about making use of the capital loss carryforwards on their books ...guess they believe they have plenty of time to make use of them ....2018 at least ...

    The net impact being that we will see the cost basis of our shares gradually reduced each month ....the good news for long term holders of ETY being that the original cost basis was $20 per share ....so we have a long way to go ....lol ...before this reduction would practically start to hurt us ....most of us having capital losses should we sell the fund in 2013 ....NOt gains ...

    Oh well ...hope this helps explain what i believe they are doing
    Mar 9, 2013. 01:15 PM | 1 Like Like |Link to Comment
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