THQ: A Resilient Fund In The Healthcare Space

Summary

  • The Tekla Healthcare Opportunities Fund has performed relatively well, helped by the strength in the broader healthcare sector.
  • THQ is continuing to trade at a steep discount of nearly 11% to NAV.
  • The fund's distribution seems quite attainable at current levels, providing predictable income for income investors.
  • This idea was discussed in more depth with members of my private investing community, CEF/ETF Income Laboratory. Get started today »

Written by Nick Ackerman, co-produced by Stanford Chemist

Tekla Healthcare Opportunities Fund (NYSE:THQ) is a fund focused on the healthcare space. This sector, relatively speaking, has performed very well throughout 2020's volatility. The tech sector is the other area of the market that has held up remarkably throughout this same period.

THQ offers investors an enticing discount of 10.81% currently, along with what appears to be a sustainable distribution. The fund should continue to perform well going forward too. Though I believe healthcare overall is a bit on the higher valuation side if compared to the broader market - after many sectors haven't traced the same recovery from the March lows that healthcare has.

THQ is one of four funds offered by Tekla. This particular fund sponsor is quite a niche manager, in that all four of the funds managed are healthcare-related. Out of the four funds, THQ has a greater emphasis on U.S. stocks and more 'traditional' healthcare-related names. This generally creates a more stable fund compared to the others. With that being said, the fund does utilize leverage. This can create volatility in a greater magnitude than if we compared the fund to something like an index tracking ETF - for instance, the Health Care Select Sector SPDR (XLV).

Currently, THQ reports leverage at 22.03%. The fund has just over $1 billion in total managed assets. This does make it quite a large fund for a CEF. The larger size does generally help with more liquidity for shareholders, which is exactly what we get with the average volume for THQ coming in at 221,315. That provides sufficient liquidity for the majority of investors.

Chart

Data by YCharts

THQ has an investment objective to "seek current income and long-term capital appreciation through investing in companies engaged in the healthcare industry, including equity

Data by YCharts

Data by YCharts

Data by YCharts

Data by YCharts

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This article was written by

Nick Ackerman profile picture
11.45K Followers
CEF/ETF income and arbitrage strategies, 8%+ portfolio yields
Nick Ackerman is an avid student of the markets and has been investing in his own accounts for over 14 years. He is a former Financial Advisor and has previously qualified for holding Series 7 and Series 66 licenses. These licenses also specifically qualified him for the role of Registered Investment Adviser (RIA), i.e., he was registered as a fiduciary and could manage assets for a fee and give advice. Since then he has continued with his passion for investing through writing for Seeking Alpha, providing his knowledge, opinions, and insights of the investing world. His specific focus is on closed-end funds as an attractive way to achieve income as well as general financial planning strategies towards achieving one’s long term financial goals.

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I provide my work regularly to CEF/ETF Income Laboratory with articles that have an exclusivity period, this is noted in such articles. CEF/ETF Income Laboratory is a Marketplace Service provided by Stanford Chemist, right here on Seeking Alpha.

Disclosure: I am/we are long THQ. 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.

Additional disclosure: This article was originally published to members of the CEF/ETF Income Laboratory on June 12th, 2020.

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