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CEF Pricing Anomalies: Buying Opportunity, or Discounts Warranted?
Basic logic would suggest that such hefty discounts [current ave. discount is 10%] add up to a screaming buy signal. Even though closed-end funds more often than not trade at a discount, there is always the upside potential of that discount narrowing, and the shares could even climb enough to trade at a premium to NAV. "There really are opportunities, if you've got the stomach for it and if you've got some time,” said Anne Kritzmire, managing director in charge of closed-end funds and global structured products at Nuveen Investments.
Ha. Most of the screaming has been mine about PDI performance the last year or so.
M* does a nice job of charting total return. If you look at purely a price chart (i.e. yahoofinance) the share price since 6/30/14 has dropped over 10%:
But during that time an investor would have collected lots dividends and this table lists both daily share price, dividends and more importantly price adjusted for dividends and splits:
M* charts show this dynamically as if an investor reinvested dividends over the same time frame. I include it's mutual fund cousin (PONDX) for comparison.
Looks like you are up 6% over this time frame you are "screaming" about. Not too shabby @davidmoran.
I have often wondered if PDI would make a good alternative to an income annuity. It presently pays out over 8% and most likely will always have a death benefit (think of the share price as the death benefit). Also, I believe cefs are inherited with the same stepped up basis as stocks making them the inherited cost basis tax free.
Yes, it's a beautiful thing if you have the stomach for it. Fidelity's brokerage page/statements show me losing my butt but I can still find it with at least one hand. Long PDI, RCS, PTY and PFN.
I've found I have to be careful using M* charts with regard to cef's. When you bring up a chart on an oef (e.g., PIMIX in Bee's post above) and then add a cef to compare, the chart shows total return for the cef on nav, not on price. The 'Performance' pages show both the return on price and return on nav, so that's typically where I go to do comparisons between oef's and cef's.
Example to show that doing the charting as above is about cef nav, not price: if you chart PIMIX today for 1y and then add PDI, PDI's total return shows as +4.59%. Go to the Performance page, and the return on nav is shown as 4.59%, but the return on price has been +7.57%.
This is what happens if you initially fail to check the reinvest box. Last December 5 I bought $9000 worth of PDI. Like a dope I did not reinvest for three months, until April. Have been auto-reinvesting since then, per usual. Current total cost is $9400 approx and current value is $8500, a loss of -9.5% approx. I do not know what 'distributions' I received Dec-April but I bet it was not $900, much less over. I have not crunched all the numbers from PDI to ensure that my Merrill accounting is accurate. (I probably will be sticking solely with PONDX instead going forward, and bail out of PDI when it breaks even. I have made money on it in the past; it is just this one 11mo partial-mistake period that irks so.)
Hi Bee, the chart pages for PDI and other cef's show both nav and price (but for TR on each, you have to go to the Performance page). As far as I've been able to tell, it's just when you start from an oef page and add a cef that you get TR on nav for the cef when you'd expect the actual TR, on price. It would help if they'd label it as such.
Also, again as far as I can tell, everywhere you see "total return" on M*; it includes reinvestment of distributions, whether it's on price or nav, as it says in the glossary:
"Expressed in percentage terms, Morningstar's calculation of total return is determined by taking the change in price, reinvesting, if applicable, all income and capital gains distributions during the period, and dividing by the starting price."
As a duffer in the game, I feel like I really have to have my brain on a roll to do cef research.
Comments
But during that time an investor would have collected lots dividends and this table lists both daily share price, dividends and more importantly price adjusted for dividends and splits:
M* charts show this dynamically as if an investor reinvested dividends over the same time frame. I include it's mutual fund cousin (PONDX) for comparison.
Looks like you are up 6% over this time frame you are "screaming" about. Not too shabby @davidmoran.
I have often wondered if PDI would make a good alternative to an income annuity. It presently pays out over 8% and most likely will always have a death benefit (think of the share price as the death benefit). Also, I believe cefs are inherited with the same stepped up basis as stocks making them the inherited cost basis tax free.
Example to show that doing the charting as above is about cef nav, not price: if you chart PIMIX today for 1y and then add PDI, PDI's total return shows as +4.59%. Go to the Performance page, and the return on nav is shown as 4.59%, but the return on price has been +7.57%.
Best, AJ
Also, again as far as I can tell, everywhere you see "total return" on M*; it includes reinvestment of distributions, whether it's on price or nav, as it says in the glossary:
"Expressed in percentage terms, Morningstar's calculation of total return is determined by taking the change in price, reinvesting, if applicable, all income and capital gains distributions during the period, and dividing by the starting price."
As a duffer in the game, I feel like I really have to have my brain on a roll to do cef research.