With markets drifting lower over the past two weeks, it's more important than ever to have income-producing stocks in your portfolio to help offset volatility. There are several ways to hold income stocks in your portfolio. You can buy individual stocks, exchange-traded funds, or mutual funds with a focus on income, but one of my favorite options are closed end funds, or CEFs for short.
If you're not familiar with CEFs, they are a type of mutual fund that issues a fixed number of shares through a single initial public offering (IPO) to raise capital for its initial investments. Its shares can then be bought and sold on a stock exchange but no new shares will be created and no new money will flow into the fund.
Because the fund's market value can move just like an individual stock, it can rise and fall above and below net asset values (NAV), which means there are times when you can purchase shares of a CEF at an actual discount to the NAV.
Factor in high yielding income with the ability to purchase shares of CEFs at a discount to their NAV, and CEFs can be a great choice for investors looking for a professionally managed income producing portfolio.
With that said, this week I want to draw your attention to BlackRock Utilities, Infrastructure & Power Opportunities Trust (BUI), a closed-end fund that invests primarily in equity securities issued by companies in the Utilities, Infrastructure, and Power Opportunities sectors and invests both in the United States and globally.
In addition to the stocks BUI holds in its portfolio, this CEF also writes (sells) options to generate additional income.
In the context of BUI, the fund considers 'Utilities' to include products, technologies & services connected to the management, ownership, operation, construction, development or financing of facilities used to generate, transmit or distribute electricity, water, natural resources or telecommunications.
Its 'Infrastructure' holdings include companies that own or operate infrastructure assets or involved in development, construction, distribution or financing of infrastructure assets. And its "Power Opportunities" includes companies with significant exposure to renewable energy technology, alternative fuels, energy efficiency, automotive technologies that enable or support the growth & adoption of new power and energy sources.
The fund currently has 57 holdings in the portfolio, with NextEra Energy, Enel SPA, RWE AG, Vinci SA and Williams Companies Inc, rounding out the top five positions with weightings of 7.8%, 4.62%,4.07%,3.36% and 3.06%, respectively.
Geographically, the United States represents 58.18% of the portfolio, with France, Italy, Germany, and Portugal rounding out the top five with weightings of 7.04%, 5.40%, 5.2% 3.48%, respectively.
At current prices, the fund trades at a respectable 0.18% discount to net asset value, so it's very fairly priced, and it yields a competitive 6.5%. It's definitely worth picking up.
One of the reasons I'm interested in energy right now, especially energy infrastructure, is because it's a market that could see a rush of demand thanks to the proliferation of AI-driven technologies. The next generation of AI is going to be a million times smarter than current models, and we're much closer than anyone realizes to its release - these new AIs could be here in as little as 90 days from now.
And when these "artificial superintelligences" arrive, it's going to create some massive upheaval. Financial markets could potentially be upended, and two-thirds of the current job market could be rendered obsolete. A handful of stocks in sectors crucial to AI's future are likely to skyrocket - and I'm not talking about the big names like Microsoft or Google.
I've got a full briefing ready to make sure you know how to survive and thrive when these new AIs go online, and exactly where to invest to capitalize on this trend before it takes off. Everything you need is at this link.
The post This Income Play Is a Perfect Hedge Against Volatile Markets appeared first on Total Wealth.
About the Author
Shah Gilani boasts a financial pedigree unlike any other. He ran his first hedge fund in 1982 from his seat on the floor of the Chicago Board of Options Exchange. When options on the Standard & Poor's 100 began trading on March 11, 1983, Shah worked in "the pit" as a market maker.
The work he did laid the foundation for what would later become the VIX - to this day one of the most widely used indicators worldwide. After leaving Chicago to run the futures and options division of the British banking giant Lloyd's TSB, Shah moved up to Roosevelt & Cross Inc., an old-line New York boutique firm. There he originated and ran a packaged fixed-income trading desk, and established that company's "listed" and OTC trading desks.
Shah founded a second hedge fund in 1999, which he ran until 2003.
Shah's vast network of contacts includes the biggest players on Wall Street and in international finance. These contacts give him the real story - when others only get what the investment banks want them to see.
Today, as editor of Hyperdrive Portfolio, Shah presents his legion of subscribers with massive profit opportunities that result from paradigm shifts in the way we work, play, and live.
Shah is a frequent guest on CNBC, Forbes, and MarketWatch, and you can catch him every week on Fox Business's Varney & Co.