AVK - AVK: Extended High Beta Convertibles Fund
2024-02-13 05:16:46 ET
Summary
- Equity markets are reaching new highs, but history suggests a potential pullback.
- The Advent Claymore Convertible Securities & Income Fund is a high beta name with a high leverage ratio.
- The CEF contains a large convertibles sleeve and a high yield bond, one utilized to support the dividend.
- The CEF's discount to NAV has narrowed towards the top of its historic range, with the fund exhibiting a high variation in its discount.
- This name is highly leveraged with a 46% leverage ratio, which also contributes to the CEF's high expense ratio.
Thesis
When the markets are experiencing euphoria, a retail investor should look at how to cut high beta investments rather than think about missing out on further gains. It now seems that semiconductors stocks are unstoppable, with new highs established every day. From market chatter, it looks like investors no longer look at fundamentals in this sub-sector, but are loath to miss out when they see others posting eye-watering gains on the respective names. While nobody can predict the future, history often repeats itself, and we are entering oddly familiar territory:
Concentration (KR French Data)