Author: Dan Plettner
Covestor models: Pure Short Opportunistic, MLP Direct Ownership, Taxable Income, Well-Intentioned Activism, Long/Short Opportunistic, Core
The broad market is facing some headwinds. Although recent Greek political developments were anticipated by many market participants and appear “priced in,” it has stimulated volatility.
In the very near term I expect that yield-focused Master Limited Partnerships (MLPs) and other income styles will outperform, although I don’t anticipate changing my allocations. Because of structural performance inefficiencies, I do not prefer ETFs or other funds for MLP exposure, but rather MLP Direct Ownership. My holding intentions within this sector tend to be extremely long term in nature.
For me, I think the important word today is “balance.” Case in point: As terrible an investment as my largest position Boulder Growth and Income Fund (BIF) has been, I feel broadly fortunate today.
I continue to believe that balance among styles is relevant, and balance among positions within various styles is relevant as well.
All the facts appearing relevant for a particular catalyst, security, or style may suggest a “zig”… yet a “zag” may ensue. The critical factor over time, I believe, is an investor’s ability to remain humble, balanced, and fully objective in looking at each set of market opportunities independently. Emotions, like ego, are harmful to objectivity.
I own multiple closed end funds, each with its own investment merits (and demerits) and internal styles. And, I do so with many different styles of my own with the Core, L/S Opportunistic, Taxable Income models.
The anticipated positive catalyst in BIF (the derivative lawsuit settlement) turned out to be a negative catalyst, with the valuation going from a mid-to-upper teens discount to worse than 20%. Mr Market voted rather clearly that the terms of the proposed settlement were bad for Boulder, a fund that had already been among the most heavily discounted in any Closed-End Fund peer group.
This is neither the time nor place for objections to the specific settlement. I need to assess myself though – particularly with regard to my estimation of the nature of a lead plaintiff’s counsel. If I ever fail to assess myself first and with the harshest critique, I will fail to grow. My displaced understanding with regard to the lead plaintiff was relevant to removal of the BIF position from Well Intentioned Activism CEFs, irrespective to valuation.
I do not have a crystal ball. I aim to remain fully objective, humble, and balanced in the opportunities I observe within my discipline in every style. I must be resolved in making decisions based on objective analysis rather than emotions.
