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My Cupolone Income Portfolio: Living With Price Swings

Mar. 04, 2020 11:22 AM ETBME, DSL, ETO, EVT, GGM-OLD, HTD, NXDT, PCN, PDI, PDT, PTY, RNP, RQI, UTF, UTG32 Comments
Guido Persichino profile picture
Guido Persichino


  • The golden rule for any long-term investor: Know how to wait!
  • February’s significant decline in the overall stock market also impacted CEFs.
  • The recent sell-off reduced premiums and spread discounts for the CEFs I identified for my new Cupolone Income Portfolio. The time has come to take action.
  • My declared goal is a 9% income. I’m not so far from that today by having made the right purchases at the right moments.

Time, Discipline, and Patience

“The stock market is a no-called-strike game. You don’t have to swing at everything—you can wait for your pitch.” (Warren Buffett)

At the end of my January article, “My 10% Cupolone Income Portfolio—A New Year’s Resolution for 2020,” I wrote that given the current economic climate, the overall yield of my proposed Cupolone Income Portfolio would likely be far below the 10% income I experienced when I built my initial high-yielding portfolio (“Building A 10% Income Portfolio”).

The CEFs I identified are:

  • BlackRock Health Sciences Trust (BME)
  • Eaton Vance Tax-Adv. Global Dividend Opps (ETO)
  • Eaton Vance Tax-Adv. Dividend Income (EVT)
  • John Hancock Tax-Adv. Dividend Income (HTD)
  • Pimco Corporate & Income Strategy (PCN)
  • John Hancock Premium Dividend (PDT)
  • Pimco Income Opportunity (PKO)
  • Cohen & Steers REIT & Preferred Income (RNP)
  • Cohen & Steers Quality Income Realty (RQI)
  • Cohen & Steers Infrastructure (UTF)
  • Reaves Utility Income Trust (UTG)

The CEFs already in my portfolio were:

  • DoubleLine Income Solutions (DSL)
  • Guggenheim Credit Allocation (GGM)
  • NexPoint Strategic Opportunities (NHF)
  • Pimco Dynamic Income (PDI)
  • Pimco Corporate & Income Opportunities (PTY)

My goal (and challenge) today is to build a new portfolio that yields at least 9% income. So, the potential of a lower yield was a good reason to wait for better times before investing.

That time has come.

The Biggest Weekly Plunge Since 2008

With the S&P 500 down for many days straight in the last two weeks of February, the CEF market followed the flow. Of course, nobody knows what the long-term impact of the coronavirus will be for the world economies, but so far it has created an earthquake in the financial markets. Can that impact be reabsorbed soon or not? Who knows?

Personally, I have long believed that the long bull run for the stock market

This article was written by

Guido Persichino profile picture
I graduated in Languages in 1988, and then worked for 25 years as an editor at various publishing houses. In 2005, fate turned my attention to the world of finance, and when I lost my job in 2013, I decided to dedicate myself to it. In particular, I focused on building an income portfolio based on ETFs and CEFs. Although I have never worked as a Financial Advisor, I believe that sharing my experiences with managing my own income portfolio can provide others with helpful insights for their own portfolios.

Analyst’s Disclosure: I am/we are long BME, DSL, ETO, EVT, GGM, HTD, PCN, PDI, PDT, PKO, PTY, RNP, RQI, UTF, UTG. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (32)

Thanks for the awesome article. today I noticed the ratings on morningstar is getting a bit confusing. Now DSL is one star and GOF is 5 stars. anyone knows whats going on ? maybe DSL has too much leverage ? 40% . Might be good ingredients for a new article !
Guido Persichino profile picture
Please read some comments to my last article:

oh someone already mentioned it, thanks
littlecubbie2019 profile picture
I own dsl, eto and ecc. Trying to time markets is a fools game. Take dsl for example, has already bounced back towards $20. I would have rather added at the lows. Eto has been good to me. Income is what is great about closed end funds.
One question the higher risk score the better? How exactly does it get calculated?
Guido Persichino profile picture
@littlecubbie7 Yes Jason, trying to time markets is—almost always—a fool game, but I think a correction should happen anyway for the excess of bullish positions after a tireless six-month run.
Here you can understand how RiskGrades work:

rainmaker64 profile picture
Good article and I agree that it was a good time to buy. I added to RQI at 12.64 and initiated PFFA (not mentioned) at 24.26 on Friday. Tekla Healthcare (HQH) also not mentioned was a good buy at $19 and 11% discount to NAV.

I suspect real estate and preferreds will do well in a sub 1% environment.

I hold all high yielding investments in my Roth for tax-free compounding.
Guido Persichino profile picture
@rainmaker64 Thank you. I mentioned HQH in my November article:


It explains the reasons why I didn't select it for my portfolio.
xKaotic profile picture
Yep, got a lot of nice fills last week on PIMCO and Hancock CEFs when panic was setting in. Now just kick back, relax and watch the NAV premiums zoom right back up again.
Guido Persichino profile picture
@kaotic But ready to take action again!
dundey profile picture
I got into PTY last Friday at 16.20. A steal.

Right on!
Guido Persichino profile picture
@dundey I got in at 16.37. You've been faster (or smarter) than me!
madisonriver profile picture
xxxx sh of PTY @ $15.77 - via limit buy order - another tranche set @ $15.16 did not trigger and is still waiting for another opportunity

Also had 3 separate UTG limit buys filled between $32.5 and $31.5

I have had these limit buys set for > 4 months - "patience grasshopper"
Red Ruffensore profile picture
I watch the Fear and Greed Indicator on CNN Business website for good buying opportunities. I sell when it gets over 80. I buy when it goes below 10. You normally get the best low prices. Picked up some PCI at 23.25, now 25.18. Just my 2 cents.
Guido Persichino profile picture
@DonSaluga I non-stop check S&P 500 Vix.
DKB2 profile picture
Everything has its season, a time to buy and a time to sell.
As you pointed out, patience is key. To quote Michael Valentine Smith: "Waiting Is".

Happy Trails...
Agree with author, a good time for buying.

A fan of PIMCO fixed income CEFs myself, recently invested in PKO (also long PTY).

Retired income investor
Guido Persichino profile picture
@usiah I am a fan of Pimco fixed income Cefs too.
I have PTY and PCN for a long time. It appears PTY performs better.
alphaseek2018 profile picture
I'd buy SPE at today/s wide discount to its historical NAV.
Guido Persichino profile picture
@alphaseek2018 I don't know SPE. My selection is based on what I wrote in my November article:

In my opinion and based on my own experience, a severe correction is the very time to buy the so called higher risk funds such as GOF OXLC and ECC etc. especially if you exited in a strong market. You not only benefit from a very high return but with a recovery a nice cushion for future volatility. Those high return funds also allow you to balance with more conservative funds to reach your goal of a 9% return but may also allow you to sit on some extra cash to be deployed during further future volatility.
Guido Persichino profile picture
@du4sloop As you read in my previous articles, I am a little bit concerned about ECC and GOF distribution sustainability. That's why I don't plan to re-enter soon.
@Guido Persichino
What you are perhaps overlooking is that while there may have been concerns as to the sustainability of the distributions of these particular funds prior to the current market meltdown, now it's the profits, distributions and dividends of the whole market that's causing concerns about sustainability, hence the sell off.
So besides the softening in the price of ECC and GOF prior to the market correction in anticipation of a possible cut now they have dropped significantly along with the rest of the market in fear of future cuts while offering both a higher return and lower price to compensate for any negative future event.
The difference is that an equal combination of say GOF ECC and OXLC is yielding 16.5% almost double your choices allowing the same income stream with only half the capital deployed leaving ample funds to deploy during any future weakness in these or any other fund one might choose. One can still hold those existing positions paying far lower dividends but a sell off offers the opportunity to buy the higher yielders at depressed prices offering a good margin of safety. The risks are no more currently in my opinion than any other fund with a lower yield. They are all being priced now for a possible future event that may or may not materialize.
Guido Persichino profile picture
I don't know OXLC, but its falling NAV (-64.84 since inception) does not bode well. The same for ECC (-45.01 since inception).
GOF is a different story, and I keep following it.
Anyway, I respect your opinions.
BULLNOVA profile picture
i have been buying up PDT like a mad dog going into some biscuits.
Guido Persichino profile picture
@BULLNOVA I get the idea.
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