HIE: An Area Of 'Value' For CEF Investors

Summary

  • HIE holds plenty of tech in its portfolio; however, the top sector is represented by financials.
  • Financials have seen significant pressure to the downside with the state of the economy.
  • Additionally, another area of exposure are MLPs/energy names. This space spent the last two years as the worst-performing sector and is following this trend YTD.
  • Looking for a portfolio of ideas like this one? Members of CEF/ETF Income Laboratory get exclusive access to our model portfolio. Get started today »

Written by Nick Ackerman, co-produced by Stanford Chemist

The Miller/Howard High Income Equity Fund (HIE) isn't a widely followed closed-end fund. Miller/Howard is a smaller firm founded in 1984. They have less than $4 billion in assets under management. This is partially why no one has probably heard of them. Considering they are contending with fund sponsors with trillions in AUM. The last reported net assets of HIE come in at only around $136 million. However, the fund offers investors opportunities at a large discount and limited term.

The fund is classified as a "diversified, closed-end management investment company whose primary objective is to seek a high level of current income with capital appreciation as a secondary objective."

They intend to invest "at least 80% of its total assets in dividend or distribution paying equity securities of US companies and non-US companies traded on US exchanges. The Fund will seek to invest in securities that the Investment Advisor considers to be financially strong with reliable earnings, high dividend or distribution yields and rising dividend growth. The Fund may invest up to 25% in Master Limited Partnerships (MLPs), generally in the energy sector. The Fund intends to engage in an options writing strategy consisting of writing put options on securities already held in its portfolio or securities that are candidates for inclusion in its portfolio. It may also engage in covered call writing strategies and it may buy put and call options. The Fund may write covered put and call options up to a notional amount of 20% of the Fund’s total assets."

This fund has a lot going on. They have an option writing strategy, and they also utilize leverage on the fund. The larger exposure and focus on dividends/distributions does mean they leaned heavily in the energy space for several years. That has

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This article was written by

Nick Ackerman profile picture
11.4K 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 HIE. 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 August 6th, 2020.

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