ເງິນປັນຜົນ 7.9% ນີ້ຖືກສ້າງຂຶ້ນສໍາລັບສິ່ງໃດກໍ່ຕາມທີ່ເຂົ້າມາໃນ '23

This market has reached a once-in-two-year turning point. And it’s made our favorite income investments—ກອງທຶນປິດ (CEFs)-terrific contrarian buys.

That’s because the best of these funds pay high dividends, usually on the order of 7%+ yields, that can get us through a market downdraft. The vast majority of CEFs pay dividends monthly, too.

Then, when markets bounce, our CEFs’ discounts to net asset value (NAV, or the value of the stocks in their portfolios) snap shut, giving their prices an extra shove higher. The 7.9%-yielding CEF we’ll talk about in a second is a perfect example: its discount rises and falls in a predictable cycle, and that discount is now sitting near once-in-two-year lows.

Translation: now is the time to buy this fund for its “dividend trifecta”: a high yield, a monthly payout and a discount that’s almost “hardwired” to disappear.

Overwrought Fears Are Setting Up Our Next Big Profit Opportunity

Before we get to that fund, though, I understand if you might be hesitant to buy now. After all, recession worries are running high, and many people fear the market could be about to take another leg down.

But strange as it sounds, that gloominess is working in our favor. First up, despite inflation fears, the increase in consumer prices we’ve been living through is ຊ້າລົງ. And any faster-than-expected acceleration in this trend in 2023 will likely ignite stocks—and by extension equity-focused CEFs.

And despite fears of a recession, the Atlanta Fed’s GDPNow model, which attempts to estimate future GDP growth, indicates near 4% growth in the fourth quarter of this year.

Even so, many permabears on Wall Street continue to bang the recession drum, and they succeeded in driving the narrative in 2022. And the truth is, they may succeed in 2023, too.

But to be honest, that’s unlikely, because it’s rare that bears dominate market sentiment for two years in a row when the data goes against them. The last time they did was back in 2008 and 2009, when the financial crisis sent many folks fleeing for the exits. But anyone who fought back emotion and took the plunge in that second year saw strong long-term gains indeed.

In other words, contrarians who bought in 2009, the second straight year when permabears dominated the conversation in the press, saw a 13% annualized return over the next decade, just from an S&P 500 index fund. That’s nearly double the index’s long-term return.

Obviously, if we’re facing another year of gloominess in 2023, we don’t want to get caught in a possible early-year downdraft, but we also want the exposure for another possible decade of 13% annualized gains. And perhaps most important, we want to keep a high dividend stream coming in, even if the permabears win and the market’s eventual recovery takes more than a few months.

This 7.9%-Yielding CEF Is Built for This “Transitional” Market

This is where CEFs come in. They’re a group of high-yielding funds that offer higher yields than pretty well any ETF: the average CEF yields 7.2%, with many high-quality funds yielding more. And these days, many CEFs trade at steep, and highly abnormal, discounts to NAV, so we’re getting their holdings for less than their true market value.

ຍົກຕົວຢ່າງ, the BlackRock Enhanced Trust ເງິນປັນຜົນທົ່ວໂລກ (BOE), a 7.9% yielder that pays dividends every month. It holds many global value stocks boasting strong cash flows, such as Sanofi SA (SNY), Zurich Insurance Group AG, AstraZeneca PLC (AZN) ແລະ Unilever
UL
PLC (UL). Not only is BOE trading at a deep discount now—it’s also near the bottom of a repetitive “discount cycle” we can take advantage of.

Demand for the fund is cyclical, with the discount rising and falling in clear waves. We’re currently at the trough of the latest wave, with the crest due in perhaps two years. But the crest has also been coming faster as BOE’s cycles get shorter.

My estimate: just on its closing discount alone, BOE could see double-digit gains, on top of its near 8% yield. And that doesn’t include appreciation in the fund’s portfolio, which would drive its market price higher still. We saw this same dynamic unfold back in ’09, and BOE beat the broader market.

If 2023 turns out to be another 2009, equity CEFs, including BOE, will take off as their discounts close and their high dividends draw in more income-focused investors. That would make now a good time to make a contrarian buy.

Michael Foster ແມ່ນນັກວິເຄາະດ້ານການຄົ້ນຄວ້າ ນຳ ການຄາດຄະເນກົງກັນຂ້າມ. ສຳ ລັບແນວຄວາມຄິດກ່ຽວກັບລາຍໄດ້ທີ່ຍິ່ງໃຫຍ່, ກົດທີ່ນີ້ເພື່ອລາຍງານລ້າສຸດຂອງພວກເຮົາ“ລາຍໄດ້ທີ່ບໍ່ສາມາດທໍາລາຍໄດ້: 5 ກອງທຶນຕໍ່ລອງທີ່ມີເງິນປັນຜົນຄົງທີ່ 10.2%."

ການເປີດເຜີຍ: ບໍ່ມີ