Our Most Recent Morning CEF Notes To Members
Deep Value, Contrarian
Seeking Alpha Analyst Since 2013
- YH Core Income Portfolio: yield ~8%
- YH Flexible Income Portfolio: yield 7.53%
- YH Taxable Core Portfolio: yield 5.24% (some tax free)
- YH Financial Advisor Model
Plus: Muni CEF Shopping List.
Our team includes:
1) Alpha Gen Capital - I am a former financial advisor and investor. Not someone from another career doing this on the side. My analysis is meant to provide safe and actionable insight without the fluff or risky ideas of most other letters. My goal is to provide a relatively safer income stream with CEFs and mutual funds. We also help investors learn about investing and how to properly construct a portfolio.
2) George Spritzer - Another career financial guru who runs a registered investment advisor with a specialization in closed-end funds for individuals. George uses the following investment strategies:1) Opportunistic Closed-end fund investing: Buy CEFs at larger than normal discounts to NAV and sell them when the discounts narrow. 2) Exploit special situations: tender offers, fund terminations, fund activism, rights offerings etc.3) Landlord Investor- spent his career as a management consultant for public sector clients at a multinational consulting firm in the DC area. He has transitioned to a new career as a full time landlord. His investment portfolio is comprised of two parts -- broad-based index funds and income plays such as preferred stock, CEFs, and REITs. He also owns individual/baby bonds which he buys on margin to boost total return. Landlord is our 'individual preferred stock' expert analyst.
www.YieldHunting.com
Summary
- Need a little assistance navigating the world of closed-end funds? You're not alone. This is a newer asset type for many investors looking to do more with their income portfolios.
- We think CEFs will see renewed interest as a tool for not having to shift more towards stocks to 'earn something.' Discounts are likely to tighten from here.
- The January Effect is around the corner. This is where discounts have historically tightened.
- Below are two morning notes where we discuss, in a very concise and straightforward way, what we are seeing in the CEF market, what looks compelling and what's expensive.
- Join now and receive 20% off your first year's annual subscription.
These are two of the most recent notes we sent to our members. We've been sending such a note on most weekdays as a means of getting the most amount of information to members with the least amount of time necessary to consume it.
Our goal with these is to get right to the point and answer the following questions:
- What is relevant to know for today?
- What happened yesterday?
- What did CEF do the day before?
- Which income securities that we cover look compelling or overvalued?
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Monday, December 21, 2020 Morning Note
*Good Morning*
Futures are sharply lower in what was expected to be a quiet market holiday weak. The cause is worries over a new viral Covid strain in the UK.
On the good news side, Congress has agreed to a $900B covid stimulus deal.
Since its Monday I’ll review and summarize yesterday’s weekly commentary which had a ton of information in it.
Discounts remain wider than they were in January or February but about the same as they were a year ago in December. By Jan 1, 2021, discounts tightened by a point from here to -3.05% on their way to -1.27 in late February.
I expected some discount widening in December thanks to tax loss harvesting but that should be over by this week. The last week in December is typically a good one. Right now, munis look the best. I list several options in weekly including one not on the sheets, NMCO, a very junky muni fund that is highly oversold.
In taxable, I noted that I picked up some DLY, DSL, and swapped IHTA for IHIT last week. I also bought some HYB which I think looks attractive here. PGZ and PCI did well last week rallying hard as did ARDC.
I devoted a long discussion to TSI and the distribution cut. As I wrote, I’ve been told that they are hoarding as much net investment income as they can to avoid the excise tax because they deem their assets cheap. The fund has de-risked taking off its leverage and selling a majority of the equities purchased in March.
I still like the portfolio and the fund. I don’t think this quarterly payer is going to keep the distribution here- it is earning far more than the $0.0382- close to double. I hope to pick up more shares of this great long-term performer if it sells off this week.
Saba continues to buy up FSLF, GIM, VTA as well as accumulate a bit slower some AIF AFT and IGD. With the proceeds from the NHS tender now in their accounts, they may be looking at a new target. We’ll be watching for a new 13G.
EHT has entered the wind up period. During this period it will continue to de-risk as it is only 5 cents from the targeted payout. Total return from here looks to be about 3.75%.
Have a great week!
Friday, December 18, 2020 Morning Note
*Good Morning!*
Futures are flat this am as we head into the US budget deadline. 10-yr at 0.94% and the VIX just under 22.The FDA endorsed, as expected, the second Covid vaccine. This one from Moderna.
Yesterday, macro data shows a weakening labor market but we continue to inch towards a fiscal package which appears may not come until next week, per McConnell. The alleged Russian government hack of US government continues to broaden with both the Dept. of Energy and the Nat’l Nuclear Security Admin suspected of being hacked.
Blackstone/GSO senior loan funds issued a special distribution of 1.6 to 2.9 cents.
TSI issued their year end distribution of 3.82 cents. That is much smaller than prior year-end distributions so I’m trying to get clarity on it from TCW.
Muni CEFs have been flailing all week as we are likely seeing the culmination of tax loss selling. Tax loss selling often ends the Friday before Christmas which is today. So far the space has seen discounts widen by 1.65% this week alone.
Most of the muni CEFs are now buy rated (from only a few at the start of the week). I like BYM, NEA, and MQT here. And in state specific, noting has changed: NKG, MUJ, and EVY.
We’ve seen some selling in taxable but not to the extent that we have on the muni side. Mortgage funds have widened by close to 1%.Preferreds have been the standout mostly because of the crazy valuations some of the Flah & Crum funds have been getting. Check out PFD, now at a 39% premium. The 5-year avg is about 5%. No reason for it to be there. Even the other funds are expensive. The only pfd CEF I own today is FPF.
Commish noted on the chat the weird move in VBF yesterday. It is trading at par following the special. That’s a clear sell. I would note that BHK is in a similar boat.
ARDC has been on a tear lately. Discount has tightened 3 points in the last month. NAV has been on fire too. Not selling here because of the NAV movement.
IHTA continues to trade near NAV while IHIT is at -3.4% representing a relative value trade.
OCCI announced their distribution and NAV as of Oct 31. The distribution is $0.52 (unchanged) and the NAV is $11.58 (up 5.8%)AIF/AFT have been strong after the distribution increases. But the NAVs have also outperformed. The discounts have closed by over 4 points in the last month.
VCIF looks cheap here but the fund went ex- for the special yesterday for $0.34. So the NAV is really $11.84 and the discount really -18.5%. The fund is moving to a managed distribution policy that will pay 8% of NAV. Looks compelling from a mean reversion/trade standpoint.
Lastly, HYB looks attractive here as it has likely been hit with some tax loss selling. Alligator mouth forming as the NAV has trended higher and price down. One of the few funds with 2 points of variance between current discount and 1-yr avg.
Have a great day!
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Our Team
Four For The Price Of One! Being one of the larger services means we have a larger budget. We believe we've assembled some of the best talent on Seeking Alpha analyzing closed-end funds.
Our stacked team includes:
1) Alpha Gen Capital - I am a career financial advisor (non-practicing) and investor. Not someone from another career doing this on the side. The AGC team and I use detailed analysis to provide safe and actionable insight without the fluff or risky ideas of most other letters. Our goal is to provide a relatively safer income stream with CEFs and mutual funds. Maybe more importantly, we also help investors learn about investing and how to properly construct a portfolio.
2) George Spritzer - Another career financial guru who runs a registered investment advisor with a specialization in closed-end funds for individuals. George uses the following investment strategies: 1) Opportunistic Closed-end fund investing: Buy CEFs at larger than normal discounts to NAV and sell them when the discounts narrow. 2) Exploit special situations: tender offers, fund terminations, fund activism, rights offerings etc.
3) Landlord Investor- Spent his career as a management consultant for public sector clients at a multinational consulting firm in the DC area. He has transitioned to a new career as a full time landlord. His investment portfolio is comprised of two parts -- broad-based index funds and income plays such as preferred stock, CEFs, and REITs. He also owns individual/baby bonds which he buys on margin to boost total return. Landlord is our 'individual preferred stock' expert analyst.
Analyst's Disclosure: I am/we are long pci, dmo.
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.