BCV: Lower Relative Yield - Still A Buy Due To Valuation

Seeking AlphaClosed End FundsBCV: Lower Relative Yield - Still A Buy Due To ValuationNov. 30, 2020 6:07 PM ET|| About: Bancroft Fund (BCV), Includes: BCV.PA, NEE, SQ, TWLOby: Nick AckermanNick Ackerman CEF/ETF Income LaboratoryCEF/ETF income and arbitrage strategies, 8%+ portfolio yieldsSummaryA large year-end distribution recently propelled this fund to a tighter discount from over a 14% discount just a few weeks ago.
Even as a "lower yielding" fund, they still pay 4.26% - not counting any year-end specials.
For a fund investing in convertibles, BCV seems like a solid choice.
Though the recent rise was quite steep, the funds 9.78% discount still has appeal.
Written by Nick Ackerman, co-produced by Stanford Chemist
We typically have a focus on higher-yielding options at the CEF/ETF Income Laboratory - though we know to not only focus on the yield solely. Still, the sum of the parts in our portfolios are over the 8% target. Bancroft Fund (BCV) just happens to be one of those funds that are lower yielding in the CEF space. This has helped create a discount of 14.22% just a few weeks ago. Still, a distribution yield of 4.28% is certainly nothing to scoff at either. Though the quarterly pay can also temper enthusiasm for the fund from income investors too.
The latest discount after the large distribution excitement has worn off is down to around 9.78%.
The fund offers an investor a basket of convertible securities, another area of the market that doesn't always get the most focus. Their goal is to "provide income and the potential for capital appreciation; which objectives the Fund considers to be a relatively equal, over the long-term, due to the nature of the securities in which it invests."
This is an older fund with inception in 1971. While the fund's share price and NAV are above where it was during inception - I believe we can still say they would have met their objective of capital appreciation. This is evidenced by the massive... Read more