Don't Be An April Fool - Buy These Income Investments

seekingalpha04-08

Harmless pranks can be so much fun to play but don't think the market's pranks are harmless.Many get hoodwinked and gamble away their hopes and dreams.Tap income abundant income sources if you want ...

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}\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nDon't Be An April Fool - Buy These Income Investments\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-04-08 21:20 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4682561-dont-be-an-april-fool-buy-these-income-investments><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Harmless pranks can be so much fun to play but don't think the market's pranks are harmless.Many get hoodwinked and gamble away their hopes and dreams.Tap income abundant income sources if you want ...</p>\n\n<a href=\"https://seekingalpha.com/article/4682561-dont-be-an-april-fool-buy-these-income-investments\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"THQ","symbol_name":"Tekla Healthcare Opportunies Fund Shares of Beneficial Interest","start_time":0,"source_url":"https://seekingalpha.com/article/4682561-dont-be-an-april-fool-buy-these-income-investments","article_id":"2426040927","we_media_id":null,"thumbnails":["https://static.seekingalpha.com/cdn/s3/uploads/getty_images/533191663/image_533191663.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2426040927","pubTimestamp":1712582400,"sourceInfo":{"source_id":"seekingalpha_hot_news","name":"SeekingAlpha"},"weMediaInfo":null,"summary":"Pick #1: THQ – Yield 11.1% abrdn Healthcare Opportunities Fund  is a CEF that specializes in the healthcare sector. It was previously part of the \"Tekla\" family of funds; Aberdeen then acquired Tekla. THQ invests in a variety of healthcare sectors, with the highest concentrations in pharmaceuticals, equipment, and biotech. Source   THQ FactsheetThe healthcare sector has faced challenges from inflation and regulations but continues to have extremely strong fundamentals and growing demand. Healthcare will remain a very strong industry, and the companies that manage to navigate the political and regulatory waters will continue to see great success. We want exposure to this sector but have limited high-yielding options. This is where CEFs can be a great option. The Tekla investment team has a great history specializing in the healthcare sector. As part of Aberdeen's acquisition, the fund has maintained the same management it had before the merger. One thing Aberdeen has changed is THQ's di","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"THQ":"Tekla Healthcare Opportunies Fund Shares of Beneficial Interest","OXLC":"Oxford Lane Capital Corp"},"translate_title":"不要愚人节——购买这些收益投资","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"OXLC":1,"THQ":1},"content_text":"Harmless pranks can be so much fun to play but don't think the market's pranks are harmless.Many get hoodwinked and gamble away their hopes and dreams.Tap income abundant income sources if you want abundant income.   Marc Dufresne/E+ via Getty ImagesCo-authored by Treading Softly  The month of April always begins with the celebration of April Fool's Day. Typically, this is a day when individuals play harmless pranks on one another, and many companies get involved by releasing nonexistent products with humorous intents. Interestingly, the history of April Fools is not credibly established as to where it originated. While many countries have different explanations for when the ritual started and follow different customs, they all originate around some level of a prank. For example, in the United Kingdom, there was a situation where a large number of individuals, hundreds even, were fooled to go to the Tower of London to watch a lion getting washed. Regardless of whether you celebrate April Fools or not, you may be the victim of one of these harmless pranks and be dubbed an April Fool, someone who has been tricked or was misled successfully. When it comes to the market, I don't want you to be hoodwinked by anything in the income investing space. This is why I spend countless hours researching, writing, and discussing different income investments. This way, our articles can be a source of idea generation, a place where you can come get some fresh ideas or revisit old ideas, and then be a launching pad for you to continue to do additional research. This April, I don't want you to be tricked or fooled. I would rather you find some outstanding investments, buy them, and let them rain income down into your portfolio month after month. So today, I want to take a look at two investments that you should buy. Otherwise, you might be an April fool. Let's dive in! Pick #1: THQ – Yield 11.1% abrdn Healthcare Opportunities Fund (THQ) is a CEF that specializes in the healthcare sector. It was previously part of the \"Tekla\" family of funds; Aberdeen then acquired Tekla. THQ invests in a variety of healthcare sectors, with the highest concentrations in pharmaceuticals, equipment, and biotech. Source   THQ FactsheetThe healthcare sector has faced challenges from inflation and regulations but continues to have extremely strong fundamentals and growing demand. Healthcare will remain a very strong industry, and the companies that manage to navigate the political and regulatory waters will continue to see great success. We want exposure to this sector but have limited high-yielding options. This is where CEFs can be a great option. The Tekla investment team has a great history specializing in the healthcare sector. As part of Aberdeen's acquisition, the fund has maintained the same management it had before the merger. One thing Aberdeen has changed is THQ's distribution. THQ recently raised its distribution by 60%, from $0.1125/month to $0.18/month We do not expect a change in distribution to have a material impact on a CEF's total return on NAV. CEF returns are either distributed or retained. If they are retained, NAV goes up; if they are distributed, NAV goes up less. However, a change in distribution can impact returns based on market price. For years, THQ has traded at a larger discount to NAV than peer THW. This was likely due to THQ paying out a much lower distribution. With the distribution raised, we expect that THQ will eventually trade much closer to NAV. Even if it doesn't, buying THQ at a ~10% discount to NAV provides us with a high yield to enjoy. This is the beauty of income investing, if the price goes up - great, if it doesn't we get our return through dividends! Pick #2: OXLC – Yield 18.7% Oxford Lane Capital Corp. (OXLC) is a CEF that specializes in CLOs (Collateralized Loan Obligations). Recently, there has been a discussion in the news about \"commercial real estate\" CLOs. While these \"CRE\" CLOs have structural similarities these are not the type of CLOs that OXLC owns. OXLC invests in CLOs that hold leveraged loans. Leveraged loans are loans originated by banks to companies with a B/B+ credit rating. They are senior secured loans that are the most senior in the borrower's capital structure. Among these loans, default rates have remained low as corporate borrowers are relatively healthy. The primary risk OXLC takes is credit risk. It owns the equity tranche of CLOs. When borrowers pay on their loans, the funds are distributed like a waterfall: the senior debt tranches are paid in full, then the junior tranches, and finally, the equity tranche gets everything left. As a result, the returns for the equity tranche are dependent on two variables – how many borrowers repay as agreed and the cost the CLO pays for the debt tranches. At current default rates, OXLC is realizing very high returns. With cash yields on their equity positions averaging over 23%. Source OXLC Q4 PresentationWith defaults coming off of all-time lows, they are likely to rise; however, we expect them to remain within historical averages. To understand how rising defaults might impact OXLC's earnings, we can look at GAAP \"effective yield\". This calculation uses historical default rates to estimate what returns will be after projected defaults, which for OXLC is 16.5%. Actual returns might be higher or lower, but it gives us a reference for what can be expected to be average. For the cost of CLO debt, CLOs use floating rate debt and have floating rate assets. As a result, interest rate movements don't have a material impact. What varies is the demand for senior debt tranches. The spread over SOFR that buyers of the senior tranches are willing to accept varies with conditions. Over the past two years, spreads for senior tranches expanded in the face of limited buying from banks. AAA spreads were over 200 bps; they have tightened and are now 120-150 bps. Source   TCW WebsiteThe equity tranche has the option to refinance the senior debt after the call date or \"reset\" the CLO, which refinances all of the debt and resets the maturity date of the CLO. When debt can be refinanced at a lower spread, the equity benefits directly from lower interest expense. OXLC has CLOs in its portfolio that could benefit from a refi or reset, and we expect to see that happen in 2024. So, in 2024, we expect to see headwinds from mildly rising default rates and tailwinds from refinancing CLO liabilities at lower spreads. OXLC is well-positioned to continue providing investors with extremely high dividends while still having a cushion of cash flow to absorb some defaults. Conclusion With THQ and OXLC, we can collect strong income from two sectors that are producing it readily. This isn't a scenario where you're left in the desert with a stick, trying to locate water. This is an instance where you're standing in the ocean, and someone asks you to find water, and it's all around you. Before drilling for oil, it's important to determine where the oil is located instead of just hoping for luck with a drill. For many, oil was discovered by accident. For others, it was discovered through careful and meticulous research. As time has moved forward and technology has advanced, research has become the primary way of finding new oil reserves, not chance discovery. Likewise, when it comes to income investing, it's not the time to be gambling at random, tossing money into the market, and hoping that it'll toss money back out to you – especially with your hard-earned retirement dollars. Instead, take the time to do the research to find where there is plenty of income available and tap into those sources. Having a retirement marked by ease and abundance is possible when income exceeds expenses. It allows you to have an excess that you can either keep and reserve, reinvest, or give to causes you believe and people you love.  That's the beauty of my Income Method. That's the beauty of income investing.","kind":null,"is_publish_news":null,"is_publish_highlight":null,"is_publish_live":null,"is_publish_wemedia":null,"editions":null,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.22.4","shortVersion":"4.22.4","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2426040927"}