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Alliancebernstein Income Fund Message Board

  • ww4231 ww4231 Jun 4, 2004 5:07 PM Flag

    Also on BTO

     

    I check out their top ten holdings. Every one was up today and the fund is trading at a big discount to NAV. Funny because my experience with CEF's that have declared managed distribution to return NAV usually have the discount fade or even leave all together. Does it have anything to do with the fact that BTO's divdidend is not listed on the financial websites etc? Any input on this?
    I did not see it until the market closed, may look into next week, does seem attractive. Welcome views from this board.

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    • It's not hard if you're familiar with the fund.
      The technical and fundamental histories are well known, as is the distinctive price behavior of the component banks.

      Everything else at this point is speculation on a chain of causes, each of which is quite uncertain. Will the policy changes be effectively publicized? How will people react if and when they are?

      Obviously, all security investment is a mixture of known (and knowable) and unknown elements. I can't see the sense of emphasizing the unknown and de-emphasizing the known.

      I find it helps to imagine you were putting some high percentage of your investable assets into each choice. Why settle for second or third best? And why waste time and effort convincing yourself that something is better than it is? (I think you could make the case that the best investors and traders are merely "shooting fish in a barrel." Their whole discipline is concerned with finding the smallest barrels and the biggest fish.)

      This seems to be a general logical problem on this board. The fact that security XYZ happens to pay a good "dividend," however one may define "good," is NOT an argument about the quality of that security at that price. You don't want to be confusing the things you happen to like with objective fundamental and technical realities.

    • I'm not sure I see the point of this. BTO has a managed distribution of 10% NAV as of the end of calendar 2003. They published material about their SEC filings for the policy change and published an announcement when it was approved.

      Presumably, they'd have to go through the same procedures were they to change back to a discretionary distribution.

      They're paying 25% per quarter with any additional cap gains realizations and/or dividends received to be added on to the fourth quarter distribution.

      The press release on the new distribution policy was dated Tuesday, December 25, 2003. You might be able to search for it on the web.

      Like they used to say in the cartoon, "that's all, Folks."

    • IAF looks like a good buy here. Check it out.

    • My bad. I read your post to say this announced payment to be the first this year. Shouldn't post before coffee.

    • Actually, equity CEFS that pay high managed distributions routinely trade at significant premiums. See, for example, the histories on AMO, USA and GAB

    • Phage, you've been spot on about BTO from the start.

      Wish I'd listened better.

    • I can.

      This fund has been around since 1994, under the same lead manager, with decent average trading volume most of the time. That means that it has a following, who will know that the five year average discount has been almost 15% off NAV. Are these people likely to regard an 11% discount as "cheap?"

      IMO, the current price of any particular component stock is irrelevant. People have bought BTO precisely because they got a pretty deep discount on their banks (along with very capable and FREE management and diversification away from individual stock risk.) So, what they're thinking about is the price of BTO, not the price of Wells-Fargo or North Fork.

      What the fund may become as a result of the restructuring is another and much more speculative question--to which many of you are paying far too much attention, imo. The fundamental history and current market technicals are known, and the rest is mostly guesswork.

      It must be nice to be a stockbroker. People put such effort into selling themselves.

    • The managed distrubution concept was announced and submitted to the SEC in late spring last year. The stock traded gradually higher as the year dragged-on, and it became apparent the first distribution would be 1Q04.

      It traded at a modest premium. When the interest rate fears hit in April, it was hammered with all other interest rate sensitive stocks <or anything that even resembled that>

      Will it ever recover? Who knows. Selling at a premium to NAV is not the norm for most CEFs <ignore DNP>. I would guess the discount narrows, but doesn't go away.

    • <<Does it have anything to do with the fact that BTO's divdidend is not listed on the financial websites etc?>>

      Yes. Even on John Hancock's site you will see a big fat $0 for dividends. That is because they are paying out long-term capital gains this year. Usually companies make one capital gains payment at the end of the year and it is not a dividend.

      So what you have here is BTO selling at a nice discount to NAV, a payment of dividends that qualifies for the preferential capital gains rate, and the majority of the market has no clue that this great deal exists because none of the financial websites think BTO is paying a dividend!

 
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