EFR - EFR: Reaching Pre-Covid Price Highs (Rating Downgrade)
2024-03-06 00:42:33 ET
Summary
- Six months ago, I recommended buying EFR due to its discount to NAV and the market's expectation of Fed rate cuts, contrary to the BTA 'base case'
- Currently, the discount to NAV has disappeared, and the Fed rate cuts are expected later in 2024.
- Despite the rich valuation, I recommend holding the Fund for its high dividend yield until the Fed cuts impact its holdings.
- Although defaults in the leveraged loan space are rising slightly, they remain low compared to historical levels.
Thesis
There is a time to buy and there is a time to hold. We are believers in active management, especially in the leveraged CEF space, and the Eaton Vance Senior Floating-Rate Trust ( EFR ) is a perfect example. When we assigned the name a 'Buy' rating six months ago, the market was trading the CEF at a wide discount, all while pricing Fed cuts for the beginning of 2024:
Rating (Seeking Alpha)