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Eaton Vance Tax-Managed Diversi Message Board

  • mike57dk mike57dk Oct 5, 2012 9:46 PM Flag

    Share repurchase update thru 10/4/12 - Interesting news

    ETY fund management reported today that they have successfully repurchased 936,100 shares of ETY in open market transactions through 10/4/12 at an average price of about $9.26 per share ....This constitutes about 0.61% of outstanding stock ....and the fund has authority to purchase a maximum of 10% of the outstanding shares ....
    The immediate result of the share purchase was to lower the discount to NAV from -14.23% to - 13.77% to NAV or about a 0.47% improvement.
    The market price of $9.71 gives the fund an unrealized gain ( short term ) of +4.63% in a little more than a month of duration. My rough calculation now shows the fund holding around $8,668,286 worth of ETY with a clear intention of purchasing additional shares each month at management's sole discretion and where they can realize substantial and immediate value.

    ETY , despite the recent market improvement, is trading with a -12.8% discount to NAV and fund management should continue to buy shares with that almost compelling valuation ....lets ASSUME they really / really want to get the discount below -10% ...and we apply the template of approximately having to buy 975,000 shares to achieve a + 0.50 reduction in discount to NAV ....and they do that each month until accomplished ...

    That would imply a further reduction in the discount to NAV in OCTOBER of +0.50 and another + 0.50 in November ....The market price arithmetic would approximate a market price of $9.86 per share if the NAV of $11.18 never moved a penny .... ( unlikely ...buts lets use that to illustrate )

    The fund publishes a $0.253 dividend at the end of November which will necessarily reduce the market price back to $9.60 ish ....( but we get the dividend ) .....

    December ...and the fund purchases another 950,000 or so shares ....and improves the discount to NAV by the same +0.50% ...and that should drive the market price back upwards ....and very very close to our $10 per share target price ( hope ) by Christmas ....

    Lots could go wrong ...but with the fund buying $9,000,000 in shares each month ...( guestimate ) They are an active and aggressive buyer ...especially when the discount to NAV drops to -14% or higher ....

    My advice .... continue to HOLD and perhaps place some additional cash in the fund will collect a $0.253 per share dividend at Nov end or about + 2.59% ....and perhaps the expectation of some nice market price appreciation as well ....

    Most folks don't bother reading the public data on funds or the prospectus notifications ...face it ..they are boring and full of legalese ...and candidly ...ETY has a " Legion " of detractors and angry investors with a $20 cost basis ...( who can blame them ? ) but in this circumstance; you can make some good money in the near term ...on a solid equity based mutual fund that is working very hard to improve the market price over the next few months ....

    Good Luck - comments always appreciated

    Sentiment: Hold

11.69-0.01(-0.05%)Sep 19 4:06 PMEDT

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