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....

Read the full article on Seeking Alpha

For further details see: