YMAG: Collecting A Big Yield In The Magnificent Seven, Spotting The Risks

seekingalpha2024-07-08

Tom Werner The Magnificent Seven stocks are back in prime form. It has been an interesting stretch, considering the seamless baton toss from one megacap to another. Recall back in May, shares of ...

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It has been an interesting stretch, considering the seamless baton toss from one megacap to another. Recall back in May, shares of ...</p>\n\n<a href=\"https://seekingalpha.com/article/4702845-ymag-collecting-big-yield-in-magnificent-seven-spotting-risks\">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":"IE00BBT3K403.USD","symbol_name":"LEGG MASON CLEARBRIDGE TACTICAL DIVIDEND INCOME \"A(USD) ACC","start_time":0,"source_url":"https://seekingalpha.com/article/4702845-ymag-collecting-big-yield-in-magnificent-seven-spotting-risks","article_id":"2449589729","we_media_id":null,"thumbnails":["https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1417606803/image_1417606803.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2449589729","pubTimestamp":1720425640,"columns":[],"sourceInfo":{"source_id":"seekingalpha_fund","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"Tom Werner The Magnificent Seven stocks are back in prime form. 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The latest craze?","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"IE00BBT3K403.USD":"LEGG MASON CLEARBRIDGE TACTICAL DIVIDEND INCOME \"A(USD) ACC","IE00BKDWB100.SGD":"PINEBRIDGE US LARGE CAP RESEARCH ENHANCED \"A5H\" (SGDHDG) ACC","LU2249611893.SGD":"BNP PARIBAS ENERGY TRANSITION \"CRH\" (SGD) ACC","LU1914381329.SGD":"Allianz Best Styles Global Equity Cl ET Acc H2-SGD","LU0310799852.SGD":"FTIF - Templeton Global Equity Income A MDIS SGD","BK4512":"苹果概念","NVDY":"YIELDMAX NVDA OPTION INCOME STRATEGY ETF","BK4549":"软银资本持仓","BK4511":"特斯拉概念","IE000W1ABFV2.USD":"PIMCO BALANCED INCOME AND GROWTH \"R\" (USD) INC","MSFO":"YIELDMAX MSFT OPTION INCOME STRATEGY ETF","BK4548":"巴美列捷福持仓","FBY":"YIELDMAX META OPTION INCOME STRATEGY ETF","SG9999015978.USD":"利安颠覆性创新基金A","NFLX":"奈飞","AMZN":"亚马逊","IE00B1BXHZ80.USD":"Legg Mason ClearBridge - US Appreciation A Acc USD","BK4554":"元宇宙及AR概念","BK4532":"文艺复兴科技持仓","LU0061475181.USD":"THREADNEEDLE (LUX) AMERICAN \"AU\" (USD) ACC","META":"Meta Platforms, Inc.","BK4553":"喜马拉雅资本持仓","IE0034235188.USD":"PINEBRIDGE GLOBAL FOCUS EQUITY \"A\" (USD) ACC","GOOY":"YIELDMAX GOOGL OPTION INCOME STRATEGY ETF","BK4534":"瑞士信贷持仓","IE0009356076.USD":"JANUS HENDERSON GLOBAL TECHNOLOGY AND INNOVATION \"A2\" (USD) ACC","MAGS":"The Magnificent Seven ETF","BK4555":"新能源车","BK4533":"AQR资本管理(全球第二大对冲基金)","YMAG":"YieldMax Magnificent 7 Fund of Option Income ETF","MSFT":"微软","TSLA":"特斯拉","NVDA":"英伟达","FDN":"First Trust Dow Jones Internet I","BK4535":"淡马锡持仓","IE00B3S45H60.SGD":"Neuberger Berman US Multicap Opportunities A Acc SGD-H","LU1823568750.SGD":"Fidelity Global Technology A-ACC SGD","BK4538":"云计算","IE0004445239.USD":"JANUS HENDERSON US FORTY \"A2\" (USD) ACC","TSLY":"YIELDMAX TSLA OPTION INCOME STRATEGY ETF","AAPL":"苹果","APLY":"YIELDMAX AAPL OPTION INCOME STRATEGY ETF","LU0353189680.USD":"富国美国全盘成长基金Cl A Acc","AMZY":"YIELDMAX AMZN OPTION INCOME STRATEGY ETF"},"translate_title":"YMAG：在七巨头中获得高收益，发现风险","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"TSLY":1,"MAGS":1,"MSFO":1,"NFLX":1,"GOOY":1,"FBY":1,"NVDY":1,"US10Y.BOND":1,"US12M.BOND":1,"US2Y.BOND":1,"US30Y.BOND":1,"US3Y.BOND":1,"US5Y.BOND":1,"US6M.BOND":1,"US7Y.BOND":1,"APLY":1,"AMZY":1,"YMAG":1,"TSLA":0.9,"FDN":0.9,"META":0.6,"MSFT":0.6,"NVDA":0.6,"AMZN":0.6,"AAPL":0.6},"content_text":"Tom Werner The Magnificent Seven stocks are back in prime form. It has been an interesting stretch, considering the seamless baton toss from one megacap to another. Recall back in May, shares of NVIDIA (NVDA) surged in advance of and through its Q1 earnings report.  Then Apple (AAPL) began to take flight shortly after its Worldwide Developers Conference. Amazon (AMZN) then grabbed investors’ attention with its solid breakout to new highs following a nearly four-year stretch of underperforming the S&P 500.  The latest craze? Tesla (TSLA), of course. The stock is up eight days running coming into the first full trading week of July. Elon Musk’s crown jewel has surged 38% just in that span. TSLA is now positive in 2024 after a huge drawdown in Q1 and Q2. Magnificent Stocks Up Huge in 2024, TSLA Back in the Green   Yardeni Research As a whole, the Mag Seven, as measured by the Roundhill Magnificent Seven ETF (MAGS), has returned a stunning 35% since its low on April 25. That’s collectively trillions of dollars of added market cap among the seven biggest US stocks.  Today, let’s take a look at a new ETF, one that pounces not only on the Mag 7’s meteoric rise, but also on investors’ thirst for big yield. I have a hold rating on the YieldMax Magnificent 7 Fund of Option Income ETFs (NYSEARCA:YMAG). In short, this fund holds the seven covered-call ETFs of the Magnificent Seven stocks:   YieldMax AMZN Option Income Strategy ETF (AMZY) YieldMax AAPL Option Income Strategy ETF (APLY) YieldMax META Option Income Strategy ETF (FBY) YieldMax GOOGL Option Income Strategy ETF (GOOY) YieldMax MSFT Option Income Strategy ETF (MSFO) YieldMax NVDA Option Income Strategy ETF (NVDY) YieldMax TSLA Option Income Strategy ETF (TSLY)  MAGS ETF Trounces Other US Equity Indexes YTD   Stockcharts.com According to the issuer, YMAG invests its assets in seven YieldMax ETFs. The fund’s name refers to its strategy of gaining exposure to the common stocks of seven companies, which together are commonly referred to as the “Magnificent Seven”. The portfolio will be reallocated on a monthly basis so that each of the seven YieldMax ETFs held in the ETF’s portfolio is equally weighted. The fund has a limited operating history and while the portfolio’s objective is to provide current income, there is no guarantee the ETF will make a distribution. Distributions are likely to vary greatly in amount. YMAG began trading in January 2024, and its total assets under management remains low at just $101 million as of July 5, 2024. The annual expense ratio is high at 1.28% and the ETF has paid a trailing 12-month dividend yield of 13.7%.  Now, it’s imperative that investors acknowledge and understand that this yield is not a traditional dividend payment that would come from, say, the cash flows of a company. Rather, the vast majority of the distribution is the result of selling options. In this case, the seven ETFs YMAG holds each effectively sell call options, capping upside potential, on their respective Magnificent Seven stock. YMAG: Distribution History   YieldMax The upside is that if MSFT, AAPL, NVDA, GOOGL, AMZN, META, and TSLA trade sideways or even rise modestly, then YMAG should perform well. If those seven equities fall, then it’s possible to lose money investing in YMAG. Finally, if the Mag Seven surges, then YMAG will likely underperform a 100% long equity strategy comprised of an equal-weight basket of the Mag Seven. Megacap-8 Stocks Are Nearly One-Third of the S&P 500   Yardeni Research Along with significant single-stock risk, since the allocation holds just seven positions, liquidity is another weak spot; the median 30-day bid/ask spread is high at 0.24%, per YieldMax, and its 90-day average volume is low at just 141,000 shares.  Another risk I assert is significant right now is the reality that implied volatility on the MAGS ETF is near 25% - that’s a historically low figure. Consider that earnings from most of the Mag Seven will come out within the next four weeks, there isn’t a whole of added premium to be earned by selling call options. Risk: MAGS ETF Implied Volatility Is Low Ahead of Earnings Season   Fidelity Investments For an investor seeking to protect their gains in the Mag Seven stocks, I would rather purchase inexpensive put options right now.  Valuation is another consideration. According to Yardeni Research, the so-called “Megacap -8,” which includes Netflix (NFLX) into the group, now trades at a record-high price-to-sales ratio while its collective price-to-earnings ratio is above 30 for the first time since the middle of last year.  My point here is that it can be a perilous wager to attempt to collect yield on a group of stocks that has turned more expensive throughout this year. We might also be in the process of a blow-off top in megacap tech – if that’s the case, then the final upward thrust would likely result in YMAG losing significant alpha to MAGS. Risk: Megacap-8 Hits a Record-High P/S Ratio   Yardeni Research Megacap-8 Valuations & Returns   WisdomTree Funds The Bottom Line  I have a hold rating on YMAG. The strategy will likely excite investors eyeing the Magnificent Seven stocks who want to collect a large yield. I see important risks right now with this fund of funds, which owns shares of covered-call ETFs.","kind":"highlight","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"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":"4.29.4","shortVersion":"4.29.4","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/2449589729"}