NBB: I Just Bought This Fund For Its Relative Value

Summary

  • NBB has a lower premium than other taxable muni CEFs.
  • Taxable munis offer higher income, on a tax-adjusted basis, than tax-exempt munis for most tax filers right now.
  • The majority of the underlying bonds in the fund are rated A or better.

Main Thesis

The purpose of this article is to evaluate the Nuveen Taxable Municipal Income Fund (NYSE:NBB) as an investment option at its current market price. As I grow increasingly cautious about the state of both the fixed-income and equity markets, my primary concern when building positions now is value. While true value may be difficult to find, I am focusing especially on relative value. This includes looking at what sectors seem underpriced compared to the market, where growth opportunities exist, or what individual funds in my preferred areas are trading at lower premiums than their peers. This last point brings me to NBB specifically. I continue to be bullish on the taxable muni sector, but I am generally concerned about rising valuations in the sector's most popular products. While NBB does have a premium, it is quite modest, and it is noticeably lower than its peers. Further, the fund's income stream is quite attractive, as the distribution has remained stable so far in 2020. Finally, given how yields have declined in the tax-exempt muni sector, taxable munis are now offering higher tax-adjusted yields for all but the highest income earners.

Background

First, a little background on NBB. The fund is run by Nuveen and its primary objective is "current income through investments in taxable municipal securities." Currently, NBB trades at $22.86/share and yields 4.95% annually, paying monthly distributions. This is my first review of NBB, as I typically write about (recommended) the BlackRock Taxable Municipal Bond Trust (BBN) as a way to play the taxable muni space. This is a fund that has performed quite strongly since recovering from the March lows, and is actually up almost 22% since my last buy rating, as shown below:

Source: Seeking Alpha

Given my prior preference for BBN, coupled with its strong return, it

This article was written by

Dividend Seeker profile picture
7.89K Followers
CEF/ETF income and arbitrage strategies, 8%+ portfolio yields

Macro-focused investor, working for a major U.S. bank. I grew up in New York, but escaped to North Carolina. I was a D1 athlete in college (men's tennis) and compete competitively to this day. My Bachelor's and MBA are both in Finance.

I provide reasoned, fact-based analysis of different funds and sectors. I list my portfolio here so readers can gain insight into what I am buying/holding, what I'm not, and how that lines up with the views I present in my articles. 

Broad market: VOO; QQQ; DIA, RSP

Sectors: VPU / BUI; VDE, RYE; KBWB; XRT

Non-US: EWC; EWU; EIRL; EWA

Dividends: DGRO; SDY, SCHD

Municipals/Debt Funds: NEA, BBN, PDO, PCK, VCV, PML

Stocks: WMT, JPM, MAA, SWBI, MCD, DG, WM

Cash position: 25%

Disclosure: I am/we are long BBN, NBB. 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.

Recommended For You

Comments (7)

To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.