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Equity CEFs: Sell EOI, Buy EXG

OK...I don't know what the big draw of the Eaton Vance Enhanced Equity Income fund (NYSE:EOI) is these days but some institution seems hell bent on continuing to buy no matter what, even after today's ex-dividend date.

The problem is that EOI's relative valuation compared to some other Eaton Vance option funds is now getting rather ridiculous as EOI is getting closer and closer to a premium valuation that has normally been reserved for (NYSE:ETV) and (NYSE:ETB), which have better track records and are more defensive.

When I compare EOI's NAV total return performance with say, Eaton Vance's largest CEF, (NYSE:EXG), its not even as good as EXG's over the past year. Now EXG is a global option income fund that sells index options (S&P 500, FTSE 100, Nikkei 225 mostly) whereas EOI is a US based stock fund that sells individual stock options, but the fact of the matter is that both funds have very similar top holdings.

In fact, all of the Eaton Vance option funds have very similar top holdings so why should EOI be up 1.5% today at market price while EXG is down over -1.0%? Doesn't make any sense particularly when EXG is already at a -10.2% discount compared to EOI's -4.3% discount.

Then consider that EXG's NAV is down -6.7% YTD whereas EOI's NAV is down -6.8% YTD. Maybe not a big difference but there's no indication that EOI should have a dramatically higher valuation all of a sudden. Even going back 1-year, EXG's total return NAV performance in 2015 was 3.5%, significantly better than EOI's 1.9%.

I'm guessing some institution just believes EOI's portfolio is more geared towards a value style and thus will be better positioned going forward compared to say an (NYSE:EOS), EOI's sister fund which is more growth and NASDAQ weighted. But it is not going to be that much different than any of the Eaton Vance option funds when you look at their top holdings so it doesn't make any sense why EOI should all of a sudden have such a huge valuation boost compared to say, an EXG.

I would be selling EOI here and buying EXG based on valuation. EOI may be getting a boost because there's not nearly as much institutional interest and a single institution can move EOI's price a lot more than say an EXG, which is a much larger fund. But EXG also offers a much higher yield than EOI, at 12.1% vs. 8.4% for EOI, and that was before today!

Disclosure: I am/we are long EXG, EOS.