![]() ![]() The company merged their four legacy funds into one general equity holding. But with essentially no buying and selling taking place within the fund as turnover is just 12% (they are effectively copying Warren's 13-F holdings), charging 1% for this is still egregious and that is before adding the fund/administrative costs on top of that. The fund recently lowered their management fee to 1% from 1.4% in an effort to close the discount and be more shareholder-friendly (along with the merger of the funds and monthly payout). Of the $0.033 per share distribution, just 21% of the payout is from dividends earned on the underlying with the rest coming from the realization of gains on the holdings. The table below details the sources of the distribution. This works well when the underlying prices of the positions is rising and they have a large bank of gains built, but once used, will result in significant NAV headwinds. In other words, the fund built up a bank of NAV and embedded gains over the last several years and are now using them to pay out a monthly distribution. However, as we noted above, most of the interim monthly distributions are fueled by gains on long-held investments, not yield of the underlying portfolio. Most other non-leveraged general equity closed-end funds pay their distributions quarterly, so this is an advantage to Boulder. While Berkshire does not pay a dividend, most of the other stocks in the portfolio do, hence the payout (although most of the recent payouts have been long gains). The monthly payout is $0.033 per share or 3.7% distribution yield on NAV. The company recently reinstated the monthly distribution that has been gone since 2008. Merging of the four legacy funds into one larger one.The long thesis to owning the shares today are predicated on: The rest is a hodgepodge of 43 large-cap blue-chip stocks that Berkshire typically holds long term and are reported in their 13F. The authors make very valid points on the quality of the portfolio, with Berkshire representing nearly 29% of the exposure. For example, see this 2013 article by ValueArtifex or the more recent one by well-respected contributor, Left Banker HERE. There have been several articles highlighting the potential for the closing of the discount. Recent maneuvers by the advisor on the fund are unlikely to have much, if any, effect on the discount. In the end, this is an expensive way to gain exposure to Berkshire Hathaway stock, and several favorite Buffett positions. We have seen several Seeking Alpha pieces over the years touting it as such but the discount on this fund never closes. Closed-end fund Boulder Growth and Income (BIF) is often touted as a way for investors to gain access to Berkshire Hathaway ( BRK.A) ( BRK.B) stock for a 20% discount. ![]()
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |