Entering text into the input field will update the search result below

How We Gained +7% "Free Shares" Of This PIMCO Fund

Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.

ETF investing, CEFs, Dividend Investing, Portfolio Strategy

Seeking Alpha Analyst Since 2014

CEF/ETF Income Laboratory is a premium newsletter on Seeking Alpha that is focused on researching profitable income and arbitrage ideas with closed-end funds (CEFs) and exchange-traded funds (ETFs). We manage model safe and reliable 8%-yielding fund portfolios that have beaten the market in order to make income investing easy for you. Check us out to see why one subscriber calls us a "one-stop shop for CEF research.”

Click here to learn more about how we can help your income investing!

The CEF/ETF Income Laboratory is a top-ranked newsletter service that boasts a community of over 1000 serious income investors dedicated to sharing the best CEF and ETF ideas and strategies.

Our team includes:

1) Stanford Chemist: I am a scientific researcher by training who has taken up a passionate interest in investing. I provide fresh, agenda-free insight and analysis that you won't find on Wall Street! My ultimate goal is to provide analysis, research and evidence-based ways of generating profitable investing outcomes with CEFs and ETFs. My guiding philosophy is to help teach members not "what to think", but "how to think".

2) Nick Ackerman: Nick 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.

3) Juan de la Hoz: Juan has previously worked as a fixed income trader, financial analyst, operations analyst, and economics professor in Canada and Colombia. He has hands-on experience analyzing, trading, and negotiating fixed-income securities, including bonds, money markets, and interbank trade financing, across markets and currencies. He is the "ETF Expert" of the CEF/ETF Income Laboratory, and enjoys researching strategies for income investors to increase their returns while lowering risk.

4) Dividend Seeker: Dividend Seeker began investing, as well as his career in Financial Services, in 2008, at the height of the market crash. This experience gave him a lot of perspective in a short period of time, and has helped shape his investment strategy today. He follows the markets passionately, investing mostly in sector ETFs, fixed-income CEFs, gold, and municipal bonds. He has worked in the Insurance industry in Funds Management, helping to direct conservative investments for claims reserves. After a few years, he moved in to the Banking industry, where he worked as a junior equity and currency analyst. Most recently, he took on an Audit role, supervising BSA/AML Compliance teams for one of the largest banks in the world. He has both a Bachelors and MBA in Finance. He is the "Macro Expert" of the CEF/ETF Income Laboratory.


  • An example of a "swap trade" alert we posted to our members last week.
  • We gained +7% "free shares" of PFN in 9 months via our CEF rotation strategy.
  • With PFL still being around +1.5% more expensive than PFN, this trade is still in play for holders of PFL.

Our membership is exceptionally popular because we help you:

  • (1) Identify the most profitable CEF and ETF opportunities.
  • (2) Earn a ~8% dividend yield together with capital appreciation.
  • (3) Avoid the overpriced funds that can sink your portfolio.

The great news is that we’re currently offering a limited-time only free trial so there's no better time to try us out! Start generating safe and reliable 8% yields from our portfolios today!

Best Present Ever!


Note from Stanford Chemist: This is a copy of the trade alert that we posted to our members last week, highlighting how our swap trades can be used to gain "free shares" of our favorite positions. In this case, we have gained +7% of free shares of PFN in 9 months, equivalent to DRIPing 9 months' worth of distribution for free! Importantly, no market timing is required with this strategy as we are invested in either PFL or PFN at all times. Our members have a step-by-step guide on how to execute our patented CEF rotation strategy here

Want to follow along with our portfolios and trade alerts? Join us on a two-week free trial here: CEF/ETF Income Laboratory.


Around 8.5 months ago, we did this...

  • Sold: PIMCO Income Strategy Fund II (PFN) (~8% allocation) at $6.61 (1090 shares)
  • Bought: PIMCO Income Strategy Fund (PFL) (~8% allocation) at $7.07 (1020 shares)

Today, we're swapping back from PFL to PFN to gain +7% "free shares" of PFN in 9 months.

  • Sold: PIMCO Income Strategy Fund (PFL) (~7% allocation) at $11.53 (1020 shares)
  • Bought: PIMCO Income Strategy Fund II (PFN) (~7% allocation) at $10.04 (1170 shares)

The reason for executing this swap was that there has been a recent divergence between the valuations of these two "twins", with PFL being over 2 points more expensive than PFN.


Data by YCharts

While a 2% differential isn't normally enough for us to make a swap, we were also fortuitously aided by slightly better NAV performance for PFL compared to PFN, when we made the last swap 8.5 months ago.

Over long periods, PFL and PFN do track each other very closely so squeezing out 7% "free shares" of PFN in less than a year is still a very decent result! Especially for a very solid fund like PFN (or PFL).


Data by YCharts

To put this into perspective, this 7% share count increase for PFN is equivalent to DRIPing 9 months' worth of distributions from PFN "for free"!

Product Assignment and Price Calculation Rules in OroCommerce How did we arrive at the +7% increase of PFN shares? 8.5 months ago, we sold 1090 shares of PFN at $6.61 ($7205) to buy 1020 shares of PFL at $7.07 ($7211). Today, we're selling those same 1020 shares of PFL at $11.53 ($11761) to buy 1170 shares of PFN at $10.04 ($11747). Hence, we got 80 shares of PFN "for free" (worth ~$800), or a percentage increase of over +7.3% in 8.5 months! (equivalent of DRIPing 9 month's worth of PFN for free!).

PFL returned +74.54% in total return over 8.5 months, consisting of +63.08% in capital gains and +11.46% in distributions.

Here's the history of our share counts in the PFL/PFN pair since inception of the portfolio on February 1, 2017. Remember, no DRIPing was required: the share growth came from CEF rotation alone!

  • PFL: 920 (Feb. 1, 2017) --> 960 (Feb. 14, 2019) --> 1020 (Mar. 23, 2020)
  • PFN: 1060 (Jun. 12, 2018) --> 1090 (Jun. 19, 2019) --> 1170 (Jan. 7, 2021)

Please note two things:

  1. First, PFL and PFN are both high-quality multisector bond funds from PIMCO that can be held for the long-term. If one misses their desired price for swapping, or simply wants to hold PFL rather than following the portfolio, they can continue to do so. This is especially because the last swap (PFN-->PFL) 9 months ago was made during the March crash, so whether or not it is worth it for an investor to swap will depend on their entry prices they used if they had followed that trade alert.
  2. Secondly, while the PFL/PFN spread is the highest it has been this year, note that during 2018, PFL had periods where it traded at even higher valuations relative to PFN. Therefore, it is very possible that we're "too early" with this swap, that PFL would continue to move higher than PFN.

Analyst's Disclosure: I am/we are long PFN.

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.

Recommended For You

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.