LONZ - EFR: Overpriced Leveraged Loan CEF (Rating Downgrade)
2025-02-06 23:59:23 ET
Summary
- EFR is currently overpriced, trading at a premium to NAV, which has only occurred three times in the past decade.
- Despite its 35% leverage, the Fund's 9.3% yield is insufficient compared to unleveraged alternatives like LONZ and FTSL.
- Investors should consider selling Eaton Vance Senior Floating-Rate Trust and explore alternatives like PIMCO Senior Loan ETF, First Trust Senior Loan ETF, or Nuveen Floating Rate Income Fund.
- EFR's valuation metrics and yield do not justify holding; I recommend a 'Sell' at the current price point.
Thesis
While investors love the story of a beaten up asset that can be picked up on the cheap, they do not admit that easily when securities are overpriced. However, a savvy investor needs to understand that a financial asset can be fairly priced, underpriced or overpriced. Even when not trading very often, overpriced tickers should be either sold or replaced with more appealing ones....
EFR: Overpriced Leveraged Loan CEF (Rating Downgrade)