BKT - BKT: There Is Both Good And Bad (Rating Upgrade)
2024-06-06 13:36:50 ET
Summary
- I evaluate the BlackRock Income Trust as an investment option and explain why I am no longer bearish on the fund.
- I previously had a sell rating on the fund due to limited opportunities, and but now I believe hold is the appropriate rating going forward, despite some macro-concerns I have.
- The fund had benefited from strong demand from the Fed and large US banks, both of whom have been scaling back their purchases of agency MBS.
Main Thesis & Background
The purpose of this article is to evaluate the BlackRock Income Trust ( BKT ) as an investment option at its current market price. This fund is one I have written about many times, and is managed by BlackRock ( BLK ), with an objective to "manage a portfolio of high-quality securities to achieve both preservation of capital and high monthly income", primarily through exposure to agency mortgage-backed securities.
While I used to use agency MBS as an equity hedge in my portfolio years ago, I had switched to other options (such as municipal bonds) and liquidated my BKT positions. Still, I keep this fund on my radar because I am always willing to change allocations when warranted. When I did look at BKT towards the end of last year, I saw a fairly negative backdrop. In fairness to me, the fund did see a sharp drop immediately following that review. However, it then rallied hard and thus has a fairly decent return despite treading water the last couple of months:
BKT Price Action (Seeking Alpha)