059 - How To Evaluate Close Ended Funds For Maximum Profits

Close Ended Funds need to be evaluated different than regular stocks. Why bother with CEFs?

Well, they're pretty undervalued right now which makes a lot of them great opportunities for your investment portfolio.

Here are the metrics we look at to determine if a CEF is a buy. 

To actually see where we find this information in our Schwab brokerage, click here.

You can find CEFs that are going ex-dividend on investing.com.

CEFs that we evaluate in this episode. 

• BGH
• TEAF
• BWG
• SCD
• FFC
• DMO
• BGB

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**DISCLAIMER**
Ticker metrics change as markets and companies change, so always do your own research. The content in this podcast is based on personal experience and is for educational purposes, not financial advice. See full disclaimer here.

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Transcript

Welcome to Roaming Returns, a podcast about generating a passive income through investing so that you don't have to wait till retirement to live your passions. Each type of investment has its own nuances and not understanding one might keep you away. We don't want that because you'll miss out on the great investing opportunities that many closed end funds are providing right now.
But trying to evaluate a CEF the same way you would regular stocks is not going to go well. So we're here to show you which pieces of data matter and how to determine if a CEF is trading at a discount, which matters ridiculously. Again, if you want to see what we're looking at in Schwab, head over to our YouTube channel via the link in the show notes.
All right, guys, welcome back to the episode that we're going to go over closed ended funds. OK, if you remember back from the day we discussed closed end funds, what that is is when they when they create a fund, they have a fixed number of shares. They don't create new shares.
They don't issue new shares. They just that's what they roll with. So closing funds are super helpful investments when it comes to income investing because they they they give off some pretty high yields, which is super nice.
And the thing I like best about them is you can get them at a discount. The reason you get them at a discount, again, they have a fixed number of shares and then people buy and sell like they normally would. And sometimes their NAV price is below what it should be.
And it's a discount. We'll go through that. You'll see.
Remember last episode we did Pfizer, Lowe's and Royal Bank so that they're still on there and we have some closing the funds to go over. I'm just going to pick five of them. We're going to start with BGH.
Never heard of it. No clue. I found it.
And if you were last episode, I did my investing.com calendar. I found BGH here. You see it going ex-dividend on the 23rd.
So you're going to go into your brokerage. Ours is Schwaby because Schwaby rocks your brokerage. If it's not Schwaby, it's garbage.
BGH. We really can't speak for Fidelity. I probably should get an account there at some point and poke around.
But OK, like, you'll know you're in a fund whenever you go over here and it doesn't have a stock profile. It just says fund strategy, fund strategy. And you'll notice here that Morningstar does ratings on all all funds.
They do a overall three year, five year tenure. You want at least three star on this. So you actually do rely on the ratings for these.
And I found and I do like the three and above three and above. I don't like when they're all here, though, because that means they're super popular. So like maybe this is the Goldilocks area here, the three and four Goldilocks syndrome.
Nice. And then another thing you'll notice that's different on the fund page as opposed to stock pages, you have just a really quick synopsis here of you get above average return for high risk. And you'll see they also have the portfolio broke down to this is up.
This is a bond bond fund. So they have 77 percent corporate, 10 percent derivative, which means like currencies and whatnot. And they only have three point six nine there and in cash, which is good.
You don't want them to be holding a lot of cash. So you want them to actually be in things, generate income. Again, the first thing you want to do is click on the five year chart.
See what's going on with this one. Always five year chart. That looks pretty good.
It's like a roller coaster. So let's do three. Okay.
The three year pulls it into picture more. You see it. We're looking at this here.
You'll see that. So you see that it does kind of look like it is for the last year and a half, two years trading within a range, which is super helpful when it comes to trading something like this. Yeah.
Yeah. Okay. Now, here's the important stuff on a fund page.
Expenses. They actually you don't have to worry about that. It's not like at the end of the year you get a bill for four percent.
They actually will take this three point nine five out of your dividends. You don't ever have to worry about this. That is about average for a closeted fund.
I mean, I know it's high if you do ETFs and other things like that. But for a closeted fund, that's about average. Their total assets, that's a little low.
I'd like it to be like five hundred to a billion, perhaps if I could. But that means it's actively, actively traded. So your portfolio turnover.
Fifty percent of their portfolio is turned over year to year. That means it's actively managed, which you can see here. I didn't even have to look at that, though, to see because like the one that's not actively traded is like four, not 50.
Okay. So your portfolio turnover, you want well above the four, well above a low single digit percent. You want it up in the mid range.
And then here's another, not necessarily a thing that disqualifies it, but that number is super high. So the leveraged amount. What does that mean? That means we just click on what Schwab says it means.
Leveraged funds that borrow money to purchase more assets in this way will generally move up more than the market when the market rises and move down further when the market falls. Bond funds that use leverage have a potential to increase the amount of income that they pay out. But at the cost of larger drops.
Oh, this is what I screwed up on in value during a falling market. Leverage inherently increases the level of risk in a portfolio. Yeah.
Leverage is bad, especially for personal. It's probably not as bad for experienced people who actually have like stop losses in place. But you're doing more calculated strategic trading.
Leverage basically means that you're able to invest more money than you actually have because the bank is willing to give you some on credit. But it comes at a cost. And if you lose or you you're wrong on whatever you're assuming it's going up or down, whether you have a short or a regular, if you go below a certain threshold, the bank essentially closes out your position because they're recouping their loss, which is why there's so much risk at this.
You don't have indefinite time. It's a like threshold based on the original purchase price versus how much money you have invested. They won't let you go over a certain threshold.
So you definitely can have your ass handed to you. I lost 40 grand using leverage before and it was gone in the blink of an eye. Not fun.
I don't like too high leverage. Actually, ideally, I'd find closing the funds that don't have any leverage. But it's not like I said, it's not a disqualifier.
I just don't. That's that's pretty high for me. I was going to say I would definitely want that below.
You look over here. They have upside and downside capture. That means in the up market, they're only capturing 86 percent of the gains, which is decent.
And in the downside, in the down market, they're dropping like 30 percent. So that's just something to keep an eye on. That's not again, not necessarily disqualifying thing that just shows you the success of these actively managed people here.
OK, so this is just all info stuff. And then we get down here. This is important stuff.
OK, because they're a fund. This is actually what their top holdings are. Yep.
It's because this is where they actually show you what they're holding. And I can tell you right now they shouldn't be holding that while we hold that icon. IEP.
That's the one that like raped our butts, although they're only in it at one point seven percent. So that's not. But you can see like the difference between funds and trusts and professionals and average investors.
You as an individual investor would not be able to find corporate bonds for these for these percentage, maybe that one. But finding corporate bonds in these small companies for 10 percent, you wouldn't be able to. That's why you have to rely on closing the funds to do the work for you, because these actively managed funds actually have people in it that are hooked up.
That's all they do. They know exactly when the prices hit that buy threshold. They have strategic metrics.
They have like strategy set up and they have people honing in and beaming on that. Whereas Joe Schmo, like us, we are in this balls deep every day, 100 percent of the time and have all these crazy tools and technologies to give us. We do all bond one.
I could actually show you what as an individual investor, if you go into your brokerage account, you go into the bonds, you're not going to find anything. Like this. Now, is that also because the companies would are more likely to loan out to these companies? These closed ended funds? Is that how it works? So they got they got the credo.
They're in the hook. They got hooked up. Whereas we don't have any money to lend them.
So there's like we don't have anybody called status clout. These guys are status. Go away.
We don't want to talk to you. In some cases, there'll be a tab down here where you can actually click on it. It'll show you all their holdings.
I mean, that's not entirely necessary. And just you see that they are they're pretty well diversified with their holdings. So that's good here on this page.
Now, do you research every single thing they're holding before you buy one of these? No. OK. You'll see their dividends been consistent for the past four months.
Yeah. Super consistent. Ten cents across the board.
Ten cents across the board. You'll see that it's yielding at what it's monthly. Eight point six.
This is super like in closing the funds. You don't want anything other than monthly. Now, is distribution rate the same thing as yield? And this is one I remember on the last episode, I said sometimes this number will be different than that one.
The distribution rate is this back twelve divided by the NAV price, whereas SEC yield is actually a more accurate figure. But we don't have that here to go with. So this so far looks pretty decent.
I like what I like what it's saying. And the next screen we're going to look at is this one in Schwab. You can actually just like it has monthly total returns.
You can click on show more and I'll pull up. OK, this chart here, hypothetical $10,000 invested in this is doing pretty good, but that's not where we're not looking at the illustration. We want to come down here.
Yes. OK. NAV price is what it should cost.
Market price is what it does cost. So I don't even look at these here. I actually look at the annualized returns.
This here is just like a like a 12 month or six month snapshot. I'm not too concerned with that. I like to look at this so you can see the last year.
It's been rocking. But since so so has the whole bond market as a whole, three years doing pretty good, it's better than the high yield bond. Like the generic category, though, actually, like they don't do like an apples to apples type thing.
This is like an apples to oranges. Whereas this one here is they say it's the best fit. Sometimes it is, sometimes it's not.
So you see that it's performing compared to what they say is the best fit five year. It's spot on in 10 years. It's spot on.
So this is a pretty consistent bond fund compared to what they think is the best fit. If you find a better best fit, that's up to you. I guess Schwab does it for you.
We don't use this as like a completely disqualifying figure, but it's helpful to know that in this so far in the last year, it is crushing like that's a big difference. So that's a that's a. OK, so 18 percent. So 18.29 based on NAV and an actual on actual share price.
It's twenty three point one eight. And here's what the average Morningstar Morningstar 11 percent. It's damn it's crushing.
It's doubling what it should be. If you want, you can do the six month, the three month, the one month and year to date. So like it's way better than the average.
Like it would be equivalent to like when you do an index fund, let's say you do like a gold miners index fund and you'll have the gold miners index fund that you're in. And then this will be the gold miners index fund like Schwab or Vanguard or something like that. That's what this is comparable to.
OK, so these numbers are very promising. Very, very, very promising. So you like the CF so far so far? So far, like what I'm saying, we have more to look at.
This is perhaps the most important part of a closing this fund. You see the one year it is trading as six negative six point six percent discount. That's what the price of it should be.
See, this is what it's trading at. So it's like a dollar, $14.57. So it's like a dollar or less per share. It should be trading for $15.80 based on this chart.
You'll only see this in closed ended funds and bonds and CDs and things like that. But like for the things that have the NAV price or the par values. Yeah, that's what it should be trading at.
So it is trading at a discount. So if you look at this chart here, I don't know if you can make it out. The one year average for this one is negative ten point five.
Is that five eight? Yeah. So it's trading at six point six five. So it's actually overpriced according to one year.
Pretty high. It's almost 100 percent overpriced. So that's troublesome.
Then you go into sensitive inception. So you did the one year first where you're looking. So what we're doing here is basically what we do with regular stocks when we look up the PE to peer ratios, we're trying to figure out if the thing is actually undervalued or overvalued.
So we know if we can actually get in it with a safety margin. You want to buy things that are lower than they're supposed to cost. That way you have a buffer to make sure that you keep your principal intact.
So all those good numbers we just looked at, they honestly don't mean anything because this is overvalued by about 12 percent. How I got 12 percent. So do you always check the since inception one or it's like the year or better? Better year one is like a snapshot in time.
The since inception is what its historical averages are. I use the historical averages. So since inception, high and low.
So so we have six point six five percent is above both negative seven and negative 14. So this is overvalued pretty considerably based on history. So even though the other pieces we looked at just a little bit ago look like a good company, this would not be a good buy in price.
So this is about 14 percent overvalued, overvalued. OK, so that's based on historical figures. So this is how it evaluates these.
This one's disregard. I don't have to do any more research on this one. This one's bad.
So as good as that one looked to overvalue, like the reason if you looked at that bottom part, I mean, you don't even do any more research. Like you don't even think that's going to come down. You just say next.
But if you look at it, sure. Since inception, it had a high of four point nine three of a premium as opposed to the six point six five discount. But this is literally like the average, the average of the industry.
Yeah. So this is this is the historical average. And this has been around since when the inception date.
So this has been around for 12 years. So it's not like it's like been around since twenty twenty two where you only have a only time I wouldn't pay much attention to this to say, like I just said, twenty twenty two, twenty twenty three, twenty twenty one. Or it's only been around for a short period of time.
This is around for 12 years. They have 12 years of data. And in 12 years, this is this is what it normally trades trades at.
So again, we're looking from it from a risk factor. If you're trying to keep your principal intact to like not hate yourself or this is what it's not investing. This is a way to set yourself up for success.
Well, years. OK, so I'm getting a little ludicrous with the pen. I'm just saying like that's like like that's why I do that.
Yeah. OK, so this one's next. Let's go to the next one.
Next. TEEF. TEEF
It's the same. It's sustainable and social. What the? This sounds like a Democratic ran closing in front here.
That's hilarious. Again, you'll see corporate high municipal municipal is good. Only reason that municipal is good.
If you don't know, this is a good number because that usually is tax deferred. OK, so you don't have taxes on it. So that's usually pretty nice.
OK, what else do we see here? OK, again, it's not sweet spot. It's not it's not quite in the sweet spot except for that one. That's one over the other two are me.
That is below average return, but it has below average risk. So that's again like remember we were talking about your investor profile. If you have a high risk tolerance, you want you wouldn't mind stuff being over here.
If you're like a more conservative investor, you want things over here. Yeah, they break it down for you. It's pretty nice.
It is pretty nice. And like so if you're a newbie or a conservative person and this is what you're looking for, but it's say this is here. Well, that one obviously you're going to do more research on, but you're getting higher.
You're getting a higher return for your lower your lower risk appetite to make signals, or that's a good that's a good one. That would be good. But say say you are like us where you don't mind the risk, but it has a lower, but it's only giving you a low return.
Well, that's just next. Yeah, that doesn't make any sense. Why would you take high risk and then get high risk for nothing? Yeah.
All right. Chart. So let's look at the chart five year chart.
So it did a precipitous drop there in 2020. I think they all did. And everything did.
So let's do the last three years. So this one just looking at the chart, you see how the lows are getting lower. Yeah.
And the highs are getting lower. That means it's just it's a trajectory in that way. With this one should be down a little flat there.
So it looks like it may be going into a consolidation phase, which means it could either rebound or go down for again. It doesn't like it just doesn't disqualify it. I'm just like that chart kind of signifies to me that the potential like there's a probability it's going to go down.
But if it has a high enough yield going down, it's not necessarily a bad thing because it will go up at some point. That's what we do this for. So like generally, it should be trading in this range here.
Yeah. So it looks like it does have room to go up. But the current charts are saying it's going to go down.
So if you get it on the downswing and it'll it'll should bounce back up to that line there. So that's OK. Again, doesn't disqualify.
This one has less fees than the previous one. OK, so there's the inception date of 2019. So this one's fairly new.
So this one is fairly new. So the historical numbers might not mean as much. This one only has 23 percent turnover and it has a lot less holdings.
You remember the last one at 250 some holdings actively managed. So that's good. And it has a lot less leverage.
So this one so far has pretty nice. Again, well, then we'll come over here upside, but they're actually they do less on the upside and they do. Oh, man, that number.
The upside upside. That means when the market goes up, they're only capturing 73 percent of the gains when the market goes down. They're losing 67 percent of the.
So why is that bad there? Because the other one was 27 percent. This one's 60. So I mean, it's still better than like if you were in the market, you're actually saving 30, 30 percent, but you're you're only getting 72.
So you're losing 28 percent when it's upside. So like they're like right in the middle. So I said it's just me.
Well, I could see why that's more conservative, like from a standpoint there. So here's your holdings. So now we see what they're holding.
Solar, solar energy. Since the fund is TEEF, that's EFWWW, whatever the hell that means. But I like this one and I like that one.
Yeah, ET is a good company. AEP is a good company. I don't know what the hell MPLX is.
It's a conglomerate of LP partnerships. It's pretty nice. So it's a way to get LPs without actually dealing with it.
They actually they actually have a closeted fund that deals with LPs. That's literally a 1099. OK, that's what I was asking.
You don't have to deal with the K1. So this might be a way to get around actually dealing with the K1 tax. Remember, we remember we clicked on this here and we have to go down here and look at what we got going on.
So there's what we're comparing it to. And it is ass. All right.
So Morningstar is super, super high at 10% for the one year. And TEEF is only at 1%. So that's Cheeks.
But again, not necessarily a disqualifying thing. It's just something to keep in the back of your mind that it doesn't perform as well as the Morningstar index that it's trying to mimic. But we see the dividends consistent.
Yeah, consistent dividends, monthly yield. We always like that. Again, 9.29% distribution rate.
So those numbers are pretty good, but it all comes down to this. Yeah, this chart. So we're looking at the one year.
What do we got for those numbers? One year, it's undervalued a little bit. It's 20.5. The discount for TEEF is negative 21%. And the one year average is what is that? 30? It's 20.56. 20.56. So it's a little undervalued for the one year.
So what's the inception showing? And remember, this is only since 2019. So this is showing it's vastly undervalued compared to what it should be. But we did have a huge drop with the whole COVID.
So that's like five. So this one, I think, is a little harder to evaluate just because it's so new and COVID is an extenuating circumstance. I think this is actually a good one.
Do you? OK. 1473. Closing NAB is 1473.
What's trading at 1162? So I think based on the numbers, this is one I would put into my chart. OK. And since I don't have this here, I have to basically do some arithmetic.
So bear with me. So what do you do? Walk us through this. What I do is I take what it's currently trading at and then I subtract.
It's 16. 16.12. So you're subtracting the actual inception average. So you divide that by the 16.12. And it gives me it's 31% undervalued compared to historical data.
So that's one that I would put on my list. Again, it's not better than this one. It's not better than that one, but it's better than Pfizer.
So that would be above Pfizer. Okey dokey. Bigwig.
BWG. I hope that you guys are understanding this. I really do.
So I don't write first things first on these. Normally, you'd like a lower price, but that is borderline too low. Really? For a closing defining.
OK, so good to know. So borderline too low there. You're looking at your Morningstar derivative.
What is happening with that derivative? Means there's a lot of volatility in it, whereas it's corporate and government, it's less volatile. So like that's going to be there's potential for this one to be pretty decent in that regard. OK, so how the price movement, that's what you kind of want.
So explain this percents. OK, so 36, almost 37% in derivative means they're trading futures. OK.
Futures, if you're not familiar, are very volatile because it's you're just using like algorithms and computer data. So you're saying that's how part of their portfolios broke out into? So 37% in that. OK, OK.
Now I understand. So corporate, it's 37% comprised of corporate bonds, which are more stable and secure. And governments are really, really stable.
And they're really so like, OK, so they try to generate cash with this. These here aren't going to move too much. Yeah.
So this is how they're getting their their income or their dividend. And yet they have a backup hedge of the the secure type stuff. So they are they are hedging to like protect your capital, your capital.
So that's good. So let's look at the five year. Again, there's if you recall, if you were all around this point, this is COVID.
Yuck. And then after COVID, it went down. But it seems like it's consolidated in this area here.
So then we have to look at the three pulling the chart. So you can this one again has a nice range that it has been trading in for an extended period of time. So this is actually that's good news, believe it or not.
I know this doesn't look like good news because you had this drop here from like twelve dollars down to six dollars. But because since it dropped, it's been trading in this range. Yeah, it doesn't have any like tilts to like go down, go down.
So that looks like it's holding pretty steady. So that's good. We like that.
All right. So inception dates 2012. So this one again has been around here.
So when the market's good, this one captures more than its fair share. But when the market's bad, it sucks huge donkey crap. So that's good to know.
This has been around for a long time. This is, you know, higher than the other two. We know that one is a lot higher.
The annualized report expense ratio is high. And look at that number. Wow.
That's like I said. OK, so their leverage is forty two point eleven percent actively managed, which he said was good. Portfolio turnover is at fifty one percent.
That's a crazy number there. That's yeah, that's high leverage. Remember that one that we said was it was at twenty five.
Forty two percent is huge. And that would explain why the upside and downside are above one hundred. Like that explains a lot.
Yeah, that's that's scary. OK, so here's what they're comparing it to. Just morning.
Here's what we're looking at. So one year double one year is a 15 percent, which is higher. Five year and eight percent morning less than 10 year less than.
So like it's so it did better in the one year than it did in the five year and 10 year. That's interesting. So that one's that one's like middle of the road.
It's like, again, me, me. OK, let's look at what they're holding. They're holding a bunch of foreign crap.
That's a lot of Mexico, South Africa, foreign Bank of America, Goldman Sachs. So they're holding a lot of secretariat foreign. Yeah, that's a lot of Columbia Republic.
That's kind of interesting. But I like their percentages. 10 percent, 10 percent of those bonds, 10 percent on those.
So I do like what they got going on. Like if you're not if you're not familiar with it, you like to have international exposure in your portfolio. And sometimes I find the best way to do that is to just get closing the funds that have a lot of foreign exposure.
That way you don't have to study like different stock markets and different companies. I think it also helps you out tax wise, too, because you don't actually get the penalties or like the extra costs. Right.
I would imagine. So this isn't bad at all. I know it looks like, oh, they're overexposed in the in the foreign market.
But you actually if you have like you say, your portfolio is like 95 percent American companies. Well, this might be something to think about because you're actually getting foreign exposure with the professional bond trader doing the work for you. So you're just paying that five percent for them to do all this.
And you don't have to worry about it. And you get foreign exposure. What was the risk tolerance of this thing? I would imagine it'd be pretty high if the leverage is as high as it is.
But there's nothing over there. It doesn't have it sometimes. Sometimes it doesn't have it.
So if it doesn't have it, this one leverage is high. And those numbers on that right side that we were looking at for. What did you say? The upside, the upside and downside capture.
If those being above 100, again, signifies the higher leverage, which signifies a higher risk. So if you're more conservative, this will be a big no, no. But you see it's popping off 11.4. So that's pretty good.
Yeah, that is pretty good. Again, I would expect that with a higher leverage percent. Now, if these companies are really good and have a perfect or a really nice strategy for mitigating the risks that come with leverage, might not be a bad company.
And this might be a good way, like Tim just said, with getting into foreign stuff while avoiding some of the fees and the extra tax crop you have to deal with investing on your own in these specific stocks or bonds. So one year, super overvalued. But you can expect that if you look at that other chart where it was like doubling its best fit.
That's why I don't really use the one year other than just. Well, that's kind of scary, because you said the price range, you said this is borderline not even good. So if this is overvalued and then you look at historically, it's super overvalued.
It's it's like a 33 percent overvalued. So this one's no good. So high leverage, higher risk, severely overvalued.
Like this would be big next. This one is next off the list that. As I think is a really good one, if I recall correctly, I think I've researched this one eons ago.
We got our ratings back. OK, 1554, that's for me. This price should be between 10 and 20.
Would be like the Goldilocks spot for CEFs. Yeah. OK.
You can find some for seven and eight dollars. You can find some for five. You can find some for like thirty dollars.
But I like this area here. Like, yeah, like the probably twelve. I would think if it's a conglomeration of good stuff, it should probably be in the range you're talking about.
So ratings. This is the one of the ones we were just talking about. Five, two ones.
High risk, high risk, low reward. That would be a big red flag for me. Big, big, big red flag.
Like most of it's on the negative side. But you do have in the three year area. They're expecting to perform really well in three years.
So let's look at the chart. OK, this chart. I like that.
OK, here's the COVID drop. Then after COVID, it shot up and then it consolidated here. And it started moving up again.
And it started going up. So this chart's looking pretty good. Go to the three year ones.
I just want to see what that looks like. Perspective was. You don't have to be a chart expert, but you have to understand like the the basics of charts, too.
Yeah. Like you don't really need a ton of like the crazy metrics. I spent years like looking into all that.
It's people overcomplicate it. It's looking at those lines of resistance and then like just even understanding like visibility of slopes. So there's your two, like for the most part, there's your two lines.
Resistance support. And it shot through it. Yeah, it broke through, which is exactly why it's trending up.
People have high confidence that it shattered that resistance. That's good. And then again, don't forget to look over here at there's your upside capture, which means in a good market, you're capturing 75 percent more and a down market, you're losing 25 percent more.
So is that risk worth? I don't think so. The reward or like that's what you as an individual investor have to determine for yourself. Well, what's the yield of this thing? That would be my question. The chart. So 2024 is when this thing started. So this is new.
So this one's really old. Total holdings. 2004, so 20 years.
So that fee is like the lowest we've seen. Yeah, that's really good there. Total holdings is only 72, but that's not terrible.
Portfolio turnover is 41%. Leverage is actually only 17.55. That's actually not bad at all. Not terrible.
Not terrible at all. And here's what it's holding. They're holding ET, they're holding Apple, Microsoft.
All this is good. BX, AVGO, OKE. I don't know what that is, but that looks like a preferred share.
So they're holding a bunch of good stuff. PAGP, MRK, yeah, those look like, Merck, Merck. So this is another example of, we just did a yield maximum where like, say you wanted to get exposure to Apple and you used the Apple yield max to get income off Apple.
Well, this is doing the same thing, just not as much yield. You got exposure to Apple and Microsoft, which you can get in yield max, but you could also get any exposure in this. They're not giving you the individual yields at this one, though.
I find that interesting. So that's a way to, well. Get into some of this stuff, too, without individual purchases.
You're getting 10, 9.9 and a half percent. Okay, so there's your distribution. 9.46%, and that one is not across the board.
No. So it's consistent, but that's just the breakdown, like some of it's dividend, some of it's short-term, like that's just for your tax purposes. Okay, so this one has had the same dividend across the board, even though that.
It looks deceiving. So far, this one looks pretty good. Let's go in here.
Just to have poofs and giggles. Okay, they say this is the best fit. All right, so Morningstar is saying the year-to-date at 4%.
Crushing it. And the actual CEF is 15.7. Crushing. Crushing.
Crushing one month, crushing three month. Crushing six. Crushing a year.
Severely crushing three. So this one is awesome so far. So I don't understand why it's saying low reward.
Who the hell came up with that metric number? I don't know, like that's why I get it. So I wouldn't even put this in the low reward category, and I wouldn't even put this in the high risk category either. So far, this looks super, super good, so now this one's actually all gonna come down to valuation.
Yup. Super, super good. I thought this was a decent one.
So even though those experts up in the thing did those valuations with the high risk and the low yield, like some of the other numbers are contradicting that, so like I wouldn't even put that in those categories. So it's overvalued for one year, which is understandable considering it's up so much. Yup, that does make sense.
But it's still trading at a discount compared to its NAV. So this is one of those ones where you have to extrapolate some information. I'll explain that in a second.
Go to since inception. I wanna see. Negative 11.
So again, it's- Still higher, higher value. Overvalued compared to its historical average. Yup.
But this is one of those times where you might wanna look at the top number, maybe do like an average between these two. So trying to do an average between the actual high and the average? Mm-hmm. If you did an average, it'd be like negative three-ish around there.
Okay, so why would you do that? Just to see- Because of like, if you look at it- Because it's on the higher end? If you look at its holdings- Oh, oh, oh, okay. It's holding all good shit. It's always been holding good shit, obviously.
No, but it may have been holding good shit. We don't know because it has a 41% turnover. Okay.
But because it broke through, if you look at it, it all kind of combines together. You look at the chart, the chart broke through that point, it's going up. So probability is it's gonna keep going up.
It's holding a bunch of good companies. Its returns have been outstanding since inception compared to what they're comparing it to. So this might be one that you have to kind of disregard.
It's not perfect science, but I wouldn't buy it. But I could see why someone would. Well, this would be one I'd probably stick on my list as a potential if I have nothing else better to invest in.
Because it's still at a discount. So that's still good, but it's historically like 30% overvalued. And that would be equivalent to chasing yields.
Chasing like Amazon or chasing Google or chasing whatever. Yeah. You understand it's a good one, but it's right now is not the right price.
So this would go on your watch list. And Tim absolutely would not buy this because he higher prioritizes value. And this is not in the value range.
Even though everything else looks good, sometimes it's better to say no to good opportunities to say yes to great opportunities. Because the thing is, if you put money in this and then you come across one that's a fantastic investment, but you don't have any capital to put in it, that sucks. Like that really sucks when that happens.
So be picky, be choosy. Unfortunately, all the numbers were looking good, but again. That last thing.
Goldilocks. Goldilocks syndrome. Ooh, ooh, ooh, ooh, what do we have for ratings? SFC.
No, we got two and two out. So above average, ooh, look at that. This one I would think so far is awesome.
Yeah. Look, historical average. So this all corporate bonds with some cash for if they can find a better deal.
So that's good. That's interesting. So this is actually mid-range for the risk.
Interesting. So average risk, but above average returns of that is a star. A star? You should have just did a checkbox.
That's a star. So let's look at our chart. I'm not trying to teach charts, but it's important.
It is important. Each one of these pieces are things you pick up over time and they build all upon themselves, so. Cause this chart.
Does look like it's trending up slightly. Didn't have much consolidation. Went down a little bit more.
Now it's trending up. So this chart's kind of like all over the place. What's the three look like? So that's interesting.
Yeah, see I actually think this looks more of consolidation before an upswing. But the look, the volume's dropping off there at the end. I don't know if that's cause of the holiday or summertime, sometimes that happens.
People might just be holding it too. Yeah, that could be it too. So volume typically means there's less drastic swings.
I like this one and like one thing I do have to mention that I failed to mention at the top is this is a preferred share fund. And preferred shares generally. Are more secure, right? $20.
$25. So that's really low. So that right there tells me this has potential to be undervalued by quite a bit.
Okay, so hopefully the numbers and the things below show that. Right, so this has been since 2003. Again.
The report ratio. Highish. Yeah, 4.9% fee.
Losses. 233 holdings. That's kind of cool.
Only 99% turnover, which is decent. That's pretty low. Actively managed, yes.
But that's high. 38.83% leverage. That's interesting.
So go to your upside. So your upside's less than 100. But your downside's a little even less than that.
So that's not bad. So you're losing 4% when it goes up and you're saving 14% when it goes down. So that's pretty.
Yeah, that's not bad. That's pretty good. So far, so good.
What's it holding? Let's look at that. I am not familiar. Liberty Mutual.
Energy Transfer, MetLife, Liberty Mutual. That's Santerra Bank. I just got a thing from them saying get a thing, get $300.
BlackRock, HSB. So this is holding like a little bit of everything. So it looks like it's holding.
Seems like it's a lot of financials, but it's holding a little bit of everything with some foreign exposure. So last year, Joel. I like what we have going on so far with this thing.
Okay. It actually looks like it's raised its dividends. Raised its dividends.
So that's interesting. It's only 7%, but. 6.81 monthly.
7% you think about in the context of like what you'd be getting is 1.2-ish. So it's like five or six times what you would be generating had you just stayed in the blue chip stock. So 7% is not the end of the world. Okay.
So go to your show more returns thing. All right. So 10 compared to 4%.
So that's pretty good. 8% won. Pretty good.
And that's really good too. Three year. So three year they actually lost a little more than the thing.
Five year. So they had a problem during COVID. Yeah.
Three year, five year. 10 years back to about average. So yeah.
So like this seems like it had a dip in COVID, but ever since they got out of the COVID thing. They seem to be actually doing really good. I wonder if they went through different management because they actually are picking things up a lot.
So these numbers are pretty tight. Yup. Look pretty good.
All right. So down to the NAV premium thing. So that looks like it's about.
It's about fair value. At NAV. For one year.
Fair value. So what's the inception? Very undervalued. That's kind of what we suspected before based on your 25 mark.
So this one. Extremely undervalued. And that looks real good.
I don't even know how to put that in a percentage. Just put. It's like a thousand percent undervalued.
I would say, I would just say five thumbs up. So this is a really good one. Like this is why like that last one, we were like, ah, maybe, maybe not, blah, blah, blah.
Well, this one here is a preferred one, which is a very conservative approach. If you're familiar with preferred shares, as it goes, preferreds get their dividends before a common stockholders do and the preferreds are almost always paid out. So you're in a more secure dividend vehicle with a ridiculous amount of upside potential.
Wow, this is a really good one. Go and put that on your list? Yeah. This one goes on the list.
I knew it. So I'm actually doing the research that I would be doing. So if you're on the email, you'll actually see these metrics when you actually get.
You'll get the email, we'll have the top 10 investments going next week and these will be on there. All right, demo. Demo.
Demo. But I'm hoping that you guys can learn these for yourself. So you don't, again, that's almost, that's almost.
That's pretty low, but that's not a preferred, is it? No, this is a mortgage. So it's not super crazy? This is a mortgage one. So that's borderline too low? This one could be interesting.
I'm glad we actually have a mortgage one. Yeah, me too. Okay.
Five years. Five years should be going up. Should be going up.
It is kind of going up. Yeah. So they had their bump and then I would imagine interest rates did what they did.
So now they're actually coming up on the upswing. So that chart's actually not terrible. So there's your one level.
There's your other level. Oh shit, other levels are right here. So it actually has broke through there.
Yeah, I think it's about to break through the actual, that resistance point and then go up to that next bump up. So scroll down a little. Well, I've mentioned this before, like in the climate we're in, most stocks are going to be overvalued.
The PEs are gonna be overvalued. So like when you find ones that are undervalued, those are like awesome. But like right now, it's mainly gonna be preferred shares and closeted funds because of the high valuation of the market.
So that's why you're seeing more of these in the email list if you've subscribed to the email. Yep. Scroll down so I can see that side because we didn't have the actual ratings crap.
I wanna see what this leverage upside stuff is. So upside leverage and then downside, those are really. So upside, you're only getting 60% of the upside, but you are.
Getting like none of the downside. So like, yeah, you're only losing. So if you're conservative, this one might be a contender for you.
This is a super conservative fund, just looking at those numbers. That's really high. The annualized report expense thingy jig.
That's super high, but remember that comes out with your dividends so you don't have to worry about it. Time. This thing's been around since 2010.
So that's a lot. 396 holdings. That's crazy.
That's a lot of leverage. Portfolio turnover is only 24% and 42. So okay, this makes no sense to me.
If they have this much leverage and they have those low gains. We need to see what they're holding. That's crazy.
Like that's crazy, crazy. But let's look at this. That seems very contradictory.
Their holdings are probably gonna be a bunch of mortgage companies that have. Typically leverage is like associated with the higher risk thing, so. But those other numbers pointed to it's conservative.
1111, so it's crushed it in one year. Like absolutely smashed it, but it sucked in five years. Again, COVID probably did a number on it.
Did some, yeah. Did better in the second year. So it looks like this is probably another one that had a COVID problem.
Yep. And then they bounced back significantly. So they got a whole huge rebound thing cause like they are crushing the Morningstar thing.
So you look at their holdings. Yeah, see. Holy shit.
Are those numbers right? Right? Federal home mortgage, 17%. 15%. You are not gonna find bonds.
Holy hell. That's crazy. Whoa.
But it's gonna be all like mortgage stuff. Mortgage stuff, mortgage, general tree lending, financial, national mortgage, assets, securities. All mortgages.
Commercial mortgage securities. And trust, yep. That makes a lot of sense.
And we've been talking about how the banks were under-depreciated and then this whole thing. So they're gonna crush it with these high interest rates. I would love to know, in all actuality, how the hell they got a bond.
For 17% and 15%. That is crazy. What's happening with that company? That, I don't even understand that.
I think that bank's gonna go under. What? That's the federal government, holy hell. Federal government does do some weird stuff.
I used to work for them and I know about all that. Here you see that's good. It has a little bit of an increase.
Little bit of an increase in the actual payout. That's a huge number. Distribution rate's 12%.
That's really big. For a conservative? It's a huge number. Oh, that's, wow.
I like this one. Huge number, 12%, wow. I like this one a lot.
All comes down to this. We have negative one. So it's very, very, very, very overvalued and it's one year.
So it's overvalued at $11. That's scary. So what's the inception? It's undervalued according to what it should be, but it's like.
Compared to its history? Compared to its history, yeah. So what's the inception one? 0.79. So it's showing undervalued for the long-term history. And I can see how it's overvalued based on that thing we saw on that other chart where it was crushing the other number.
So what's your consensus? It's about 200% undervalued, so this is actually one I put on my list. I literally just go on the data. I don't have a bias or a preference.
The data's saying that this should go up to that. Now, is there a possibility it goes down to this? There is, but I don't foresee COVID happening again anytime soon. Is there a possibility it goes up to this? Probably not, because you should remember what happened between 2000 and 2008.
We had a fucking mortgage bubble where everything was overvalued. So the odds of it going, probability-wise, you have a better chance going to this than that. But we still have a little room.
Yeah, you're looking at the historical average. This is what it's done for 20 years. This is where it's been, the average, and this is where it's currently at.
20 years' worth of data is a really good indication that this is undervalued by 0.79. 41% undervalued. Okie dokie. That looks pretty decent.
That's a keeper. Okay. So, so far, the ones we've looked at, that's probably the best one.
I mean, I understand this one's more undervalued, but you're getting a lot more. You're getting twice as much income from... Yeah, demo looks... Last one. And then I'm gonna start packing for my trip to New Mexico.
I mean, we're doing more than five. This is like extra stuff for you. BGB? BGB.
Summarize why you're doing this. Okay, price is in a good price range. Price is in a good price range.
You like... $12.26. Like I said, 12 to 20, around there. And this says credit, so... Bad. Bad on the Morningstar rating, or the ratings.
Everything's at the one or two star. High risk, low reward. Bad.
Bad and bad. So it's three, three bads there. Chart, five year.
That doesn't look terrible. This one actually has a... There's one point and there's the other point. So it trades, it has a wider band of trading.
Three year, looks like it bounced off the bottom. It's gone up, about 20%. Working its way up.
Upside's 59. That's a lot. High fees, 535 holdings.
81% turnover. Now the problem, okay, now I will mention this. Like this here, you don't really... You don't want tons and tons.
You don't really care about the number, but this is too many. Yeah. Like this would be like, if you had a portfolio, you had 534 stocks in it.
That means... Imagine managing all that. That would be a huge pain. But like I'm saying, if you have winners, you're not letting your winners run.
You don't have enough money in your winners because you have 532 other holdings. And this 36.44% leveraged, and yet you're getting your upsides only 59%. This is another conservative one, though.
You're getting 60% up, but you're only... You're saving 80% on a downturn. So like that's, again, it'd be your risk appetite. Yeah, I don't like that 530 some holdings, though.
That's way too many. Because again, what's the point of even looking at the holdings if they're not holding things for very long? Or holding, they just hold so many. Like it doesn't... They have too many.
They had an 81% turnover rate. Too many. Oh my goodness.
Yeah. 0.8%? Like you're not... Normally, I don't even like look at... Like I don't mention much of that. This is what too diversified looks like.
This is what Warren Buffett said when you're an idiot if you have too many. Yeah, this is what over-diversified looks like. But kicking its ass one year.
Okay. Okay-ish for five years. Okay-ish for 10.
Just even on 10 years. So like it's doing what it's supposed to be doing. I mean, unless they turned it around recently, I don't know.
That one year is double what the actual thing is. They have increased the dividend. So, the dividend went up.
That's always a good thing. From 9.3 cents to 10.1. That's a good... 9.6% distribution rate. And here we go.
And it looks like it's overvalued. Overvalued by like 50%. So, negative 5% to negative 9%.
So, it's overvalued. So, that's negative eight. So, that's pretty far overvalued.
Yeah, so that one's probably about 40% overvalued. So, that would be a no-go. Just based on no matter they raise the dividend, no matter that it's doing so well, the one year and the 10 year.
The 10 year, it's right on with its average and its average should be 8.3. So, this one's super- 12.78, what was the original price? So, that's- That was the NAV closing. It's just a smidge under that. Yeah, that doesn't seem- I don't like this one.
Yeah, I don't like that one. At all, based on just those numbers on the bottom. Several factors.
So, that one is a bad. So, there you go. That's like, we went through valuation.
Like I said, it's completely different when you do a closing to fund. You're looking at its historical price to NAV discount or premium. There was no premium ones.
There are some that trade over what they should, historically. Like a PDI would be example. Like one of the PIMCO ones, they usually are about 20% overvalued.
And sometimes you get them for like 4% overvalued. So, you're still getting them at a premium of 4%, but it's actually a 16%, you know, 16% discount. So, like there are some that will have a premium that they trade to.
But majority of the time, closing to funds, you will find them that they are actually trading under their NAV price. So, the tricky part is, you have to really stay disciplined when it comes to this number. And like that SCD one was awfully enticing, but you have to stay disciplined.
Yeah, stay disciplined because there's always gonna be a better one that pops up. There's a reason why this historical number is what it is. It has years and years and years of history generally.
And if this number is a lot higher than it, the probability is that this is going to go down so that this number becomes more in line with this number. Yeah, and if you're really, really, really worried about that, your principal going down, this is how you mitigate that. Could you at the same time, if it was like a 12% yielder, you get 12% every year and it takes three or four years to go down, so you're actually breaking even? You could, but like, if your objective- That depends on your risk level? If your objective is to capital preservation with dividends, well then you don't, you have to make sure you evaluate closing to funds properly.
And you can still beat the market. My mom's portfolio showed that. You can still get into conservative stuff and still generate yield and still beat the market.
So like- So it's possible, it's just- It is possible, you just have to stay disciplined to the system. Like I said, know your metrics, whether it's PE, whether it's PEG, whether it's historical, like in this case here, whether it's the historical NAV price or whether it's another factor. If you have your own metric when it comes to closing to funds, let us know and I'll gladly take a look at it, but what I found is this is the best way to mitigate risk in closing to funds.
Alrighty, so hopefully you guys learned something. You get to see what we actually do in real time versus just listening to us. And this is probably the last episode we're gonna do before Tim comes back from his road trip.
So we don't know what we're gonna talk about, but I'm sure it's gonna be something real juicy once he does some introspection and stuff from his trip. So that'll be an exciting episode. I'd like to do more of this, so let us know if you like the actual real time data or if you'd rather just have us have a podcast with whatever topic we're talking about without having to look at the screen to match it up with what I'm saying.
Let us know. I just thought this would be interesting so you guys could see me actually evaluate things. I have, like I said, I have never, I didn't know and I just did this yesterday.
I found, I went on to my investing.com. I got the stuff going ex-dividend for the week that I'm doing the email for and I pulled the ones that looked decent and I put them in here. So I didn't research these at all prior to us doing this. And this was all like what I do every week for the email.
This was how I evaluate things and like. Which you'll probably see unless he finds anything between then and now in that next week's email or the 20th's email when it comes out. All right guys? So if you need to, subscribe to the email.
You get all this information. If not, hopefully you learn to do it, to learn the data you need to know to do it yourself. Agreed.
All right guys. And I'll see you guys in a couple weeks. I'm going out to New Mexico to hang out with the family and ride a bike.
A lot. A lot of biking. See ya.
See you guys later.