Closed-End Fund Morning Briefs
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.
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Summary
- Each morning we send out a quick note to members to tell inform them what is happening, what happened yesterday, and how to invest based on it.
- The notes are concise and easy to read with clear actionable conclusions.
- No need to a read a 3,000 word report in order to get information on what to buy or sell. (Although we do those too!).
- Right now we are running a 14-day no commitment free trial and a 20% off discount to the annual subscription.
We send notes like this every morning before market open. These are simply, straightforward, and concise notes that come right to your email and are on our main chat. In them, we discuss in 500 words or less, what is happening, what has happened, and how to take advantage of the opportunity.
If you would like to receive these notes everyday to augment your fixed income investing allocation to produce 7%-9% tax-equivalent yields, then consider joining Yield Hunting.
We are currently running a free trial for the next 14 days and a 20% discount to the annual subscription.
Wednesday morning's note:
alpha.gen.capital sent a message on #Yield Hunting: Alt Inc Opps:*Good Morning!! * Equity futures are flat despite news of an improved approach to vaccine distribution. Also, the Fed gave some mixed signals on tapering and whether that occurs in 2021. We'll also get important CPI data this morning.Yesterday, the reflation trade continued as the SPY was flat, but energy rose 3.5%, banks were up 1.5% and materials were up 1.4%.I posted bullet points from a note from JPM yesterday where one of their top analysts suggests there's 26% more upside to the S&P. They use aggregate equity allocations for their analysis showing that they are currently 43.8%, which is above the post-lehman avg of 42.3% but below the post-lehman high of 47.6%. The 26% assumes we get back to that high. Take that for what you will.HGLB just cut their distribution bigly, but 15.5%. That is their first cut in over a year. That gives you less of a reason to own this fund. I have been surprised that the massive discount hasn't closed on this one out now it appears it may widen back out more. This is one to continue to avoid.Yesterday in CEFs, it was a mixed day with NAV mostly higher except in EM debt and preferreds (MLPs were up over 4% again) while discounts were wider in taxable CEFs (taxable munis were wider by 1.3%!), with mortgages and loans the only areas that saw tightening.Commish scolded me for not including this important piece of news in yesterday's note. Eaton Vance released their results from the joint special shareholder meeting of certain CEFs. In the release, they noted that a number of funds approved the new advisory agreement with Morgan Stanley. One fund, however, did not. That was EVG. The shares rallied by over 3% on the news with the discount tightening from -10% to -7%. The release stated:_*Shareholders of Eaton Vance Short Duration Diversified Income Fund (NYSE: EVG) voted at the Meeting not to approve the new investment advisory agreement for EVG. The Board of Trustees of EVG will consider what additional actions to take with respect to EVG.*_Investors are banking on some sort of special situation like a large tender offer or perhaps even full liquidation. The fund is smallish at $30), (compared to EVV at $2B). They may roll EVG into EVV or Morgan may just say "whatever" this is a sideshow for them and get rid of it. Investors may want to take a flyer in it to bet on some sort of outcome.In other fund news, ETX finally fell back to Earth. As a muni term trust that liquidates in 8 years, it was trading at a 5% premium (it was a sell on the sheets). It corrected yesterday to the tune of 3.8%. Still at a premium but a small one. NBH did the same.Conversely, DBL recovered its discount yesterday after just a few days.Another fund i'm watching is IHIT. This is a fund we've traded around a bit and swapped occasionally over to IHTA. The discount is now relatively tight at -1.9%. if it closes more, it may be worthwhile to swap to another term or simply hold. The NAVs on both funds have been doing well and could actually hit their targets in 2 and 3 years respectively.TSI is now a buy on the sheets. I know some other commentators have made negative comments about the fund but i really like it. It did its job last year returning 4% on NAV and 7.2% over the trailing one-year. Not bad for an unleveraged fund. The discount is now approaching -5.5%. The yield is the big question but i do think they will re-increase it come March. The NAV has fully recovered from the March decline and the fund's holdings have not changed very much at all in the last year. No reason that they couldn't pay out more.PIMCO goes ex today. On the news of PIMCO, RCS fell by over 2.3% at one point yesterday and Commish pointed it out on the chat. I did nibble on some more. The shares recovered about 1.3% of that decline but are still relatively attractive. No hurry to run out and buy today since we have 30 days until the next distribution.Landlord has a great report out this am discussing preferreds in a rising rate environment and some opportunity there. He writes "In a rising rate environment, focus on issues with limited duration, high coupons and ones that are pinned to par." i like his CIM-A, NYMTO, CMO-E options especially.I am also following NHF-A. The share price continues to fall as investors dump their tendered new preferreds. yesterday they fell another 2% to $21.90 which implies a yield of 6.8%. I really think we back up the truck when this gets to $20 though I'm nibbling on the way down since we just don't know how low it will fall. Another 140K shares were traded yesterday bringing the 3-day total to about 600K. More than 3M were issued. Not to say that all 3M shares will be dumped but that is the high water mark.I would also look at OPP-A. which is the preferred leverage for the CEF OPP. The annual coupon is $1.09375 which is not all that impressive but it is very safe. The shares are now back under $25 ("par") and there's a chance that the fund open-ends in May. This is also one of the thesis for owning the common, OPP which is in the Core. Just watch the volume, only about 15K trade per day. But you get a 4.45% yield that is investment grade and safe.In other taxable CEFs, PPT and DSL continue to look mildly attractive here. There isnt a whole lot compelling right now. Not much meat in terms either thats why you need to jump on those when they are there. So focus on the two pfds above, OPP-A, NHF-A, and TSI, DSL, and PPT.Have a great day!
Thursday morning note:
*Good Morning!*Futures are mixed despite what is some good news. Gold is down another 32 bps to $1,840. 10yr yield is 1.11%, and the VIX is at 22.32, still stubbornly high.Today, President-elect Biden plans a new stimulus announcement that is expected to be as much as $2T. Details will be released after the market close. Macro focus today is on jobless claims. We also received phase 1/2 JNJ vaccine data which was very positive and may receive phase 3 by the end of next week. Management expects an FDA decision by March.Yesterday, markets were led higher by Big Tech as small caps sold off. Maybe a case of 'sell the news' into Biden's fiscal package debut. FANG+ had a strong day. But today, small caps are rallying and we are seeing again a rotation into the cyclical trade although surprisingly oil is not rallying.Yesterday, NAVs were green across the board with mortgages, tax munis, real estate and utilities doing well. Discounts also were mostly green except in tax munis, MLPs and utilities.Not too much movement yesterday. I did sell my remaining HNW stake (didn't know it until this am when i saw the trade confirm). The discount is very tight although there is activism in the shares. As I've noted, not too wild on high yield at the moment. Prefer to keep my KIO and ARDC positions in the space and that's about it.Same with preferreds, I'm basically out of the preferred CEF space and now simply hold a few individual preferreds like NHF_A, NRZ-C, ECCB, and some mREITs. The percentage of my portfolio devote to preferreds is now minimal at less than 5%. The rate risk is too high. I would be relegating my exposure to a few near or under par issues that offer some degree of protection to rising rates. The mREIT preferreds fit that category. TWO-E, CMO-E, NYMTO, and CIM-E are in that bucket. Spread your bets around.Taxable munis should also be in for lower NAVs over time if interest rates continue to climb- and i do expect that for at least a couple more quarters. So if you worry about seeing your market value in some funds go down, i would be more tactical here and use the premium in those funds to your advantage by swapping out. If you only care about the distributions, then just sit tight as they are mostly covered and relatively safe.In tax-free munis, RFM fell back by 1.7% yesterday and the discount is now at -7%. The NAV on the fund has been going gangbusters rising about 1% to 1.25% per month for several months now. I still like owning some NMCO here. Discount has tightened some since i've been mentioning it but still relatively cheap. The new Biden stimulus bill should be a boon for weaker municipal issuers. Some of that is already priced in (hence the higher NAVs). OIA is another good low IG choice.Still nothing to do in term funds. This area seems to come and go every few weeks/months. You need to get in when there 's green and just hold as they tighten back up. I liken these funds (found on the term funds tab on the Google Sheets) as tether balls. They swing out from the pole (NAV) and eventually come back towards the pole. With that tether, the ball cannot go rolling down the street unless the sponsor cuts the rope. In the meantime there's a nice yield.Not much else going on. Same taxables as the last few days look attractive. Nothing new here. DLY now sub-6% so that's nice after we added it more heavily to the Core. TSI at a -6.3% discount. That is one I'll likely add to. PIM/PPT, RCS, PHK, and DSL also are the most compelling choices right now though not back up the truck buys- other than TSI.One announcement is that we will be creating a new chat room. This one will be "read only" where Commish, Landlord, George and myself can post just some relevant tidbits on funds or the markets or whatever. The main chat room will remain the same as a place to ask questions etc. This will allow non-chat engaged members to not have to sift through the main chat to find things that we say.Have a great day!
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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.
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