What a crazy day in equity markets today. Not much to say about it since we were bound to get a bounce at some point in time, although coming in the middle of the day and bouncing back into green from way, way down was a bit of a surprise.
Regardless of the bounce today I fully expect that we will see some big down days yet this week–and again maybe a big up day. My suspecion is we will be heading further south in the days and weeks ahead.
Interest rates moved a little lower during the day today–down to the 1.71% area before bouncing back to close around 1.73% – off 1 basis point.
Some folks are looking at doing a little buying in some closed end funds–mentioned in some of the comment sections. In fact I bought a tiny starter in the Royce Value Trust (RVT) and by tiny I mean just that–looking to buy more probably but ‘scaling in’ is no doubt the best method to buy right now. RVT pays a nice dividend of around 7% and has a stellar track record over the last 36 years. I will be watching some others as well and looking for bargains.
I have made no sales for weeks (or maybe months-it has been a while). Our portfolios have fallen from all time highs but remain less than 1% off those highs–it will be a tough year to make much (if any) money now on a total return basis–collect dividends then take a little capital hit (if rates move higher) – rinse and repeat. Of course those looking for ‘immediate income’ are doing just fine.
Picked up a few more shares of RILYT@25.02 and added a bit to my DNP holdings. DNP has a ridiculous premium, but the income is rock steady and the NAV is about the same as 5 years back so it does what I need it to do. Not retired yet, will be in 6 months so income is #1 concern.
Tim:
How is RVT paying a 7% dividend if the fund utilizes very little leverage (less than 4%) and has 60%+ of the portfolio in small-cap common stocks (some that don’t even pay dividends)?
The only way that can happen is if a large portion of the distributions are not income but either short-term/long term capital gains or return of capital. If you look at the distribution page for RVT most of each dividend is comprised of long-term gains (since the fund is so old). Just keep in mind this is in NO way a true income-type CEF.
https://www.royceinvest.com/funds/royce-value-trust/
That is why the fund was created at $10 back in 1986 and is priced at only $17.17 today.
Also, Rida just did a big bullish story on RVT 4 days ago. Caveat Emptor.
https://seekingalpha.com/article/4480634-let-your-retirement-income-grow-for-decades-with-7-percent-yield-rvt
Rob–they have returned around 10% annually since 1986–I don’t care if it is ROC and am well aware that the share price gains are minimal and the reason is because of ROC etc. I am trustful of the management and performance has been supurb that is what I base a good part of my investing decisions on.
Tim:
Understood. But RVT should not be in anyone’s “income” bucket – it really needs to be in your “stock market/equity” exposure bucket.
If small caps crash further in 2022, RVT will be annihilated. That is why it has already fallen 12% in 2022.
The fund actually hasn’t paid a ROC since 2011 – nearly all the distributions are comprised of short-term and long-term capital gains. Expenses eat up nearly all of the true dividend/interest income.
Good luck to all.
Rob–as I mentioned I bought a tiny amount–mostly as a placeholder (a reminder to me to watch it). I suspect you and I look at things ‘differently’.
Tim:
I appreciate the idea since I have heard many good things about Royce in the past, but never took the time to actually do some homework on it.
When I’m ready to buy more small-caps, RVT is the first vehicle I will consider as the portfolio management team is very impressive.
Right now, I only have a tiny/microscopic position in small-cap fund PVCMX, but the manager is like 80% cash today!
I think you are both (Rob and Tim) right. RVT has one of the best records for long term unlevered returns, but it will correct and suspend payouts if things get hairy. Great management, but how much longer will Chuck Royce be running it?
Qniform–my son and I were discussing this very thing on Sunday night–given my sons youth it (Chucks age) was the first thing he noted.
Thank you for mentioning RVT – sure, it is not quite an income play like the preferreds & bonds but sure a decent yield play if you assume the markets don’t have too much more downside as measured by the Small-Caps and IWM.
Today traded a low as $16.70 but still above crazy Monday 1/24 lows. A decent buy here to play the bounce in the market while collecting some dividends while waiting
I have been selling over the past few weeks in anticipation of a downturn, and to increase my cash position. Added to some quality preferreds today at what I consider to be good prices: HFRO-A at $25.00 and T-A at $25.25. WIth all of the IG preferreds with decent dividends that have been called, my IG preferred investments are significantly lower than my target allocation. Also picked up some common stocks with reliable dividends: HBAN, ORI, and LEG. My immediate income levels are in good shape.