How Investors Got the AI Selloff All Wrong (and 2 Big Dividends to Play It)

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Here’s my take on the DeepSeek selloff we saw last week: It’s a buying opportunity, especially for income investors.

(I wrote a bit about this in last Thursday’s article. Since the market has rebounded a bit since, we’re going to talk about it more today. A preview? It’s not too late to buy the dip.)

Income Investors: 2, Speculators: 0

Why do income investors hold an edge here? Because they have a chance to buy NVIDIA (NVDA) and other AI stocks, including some private-equity firms few people have access to, through closed-end funds (CEFs).

Tapping the selloff this way gives us two key benefits:

  1. Big dividends—the two funds at the heart of our strategy yield an average 10.4% when we buy them as a set.

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BlackRock is making changes to some of its highest-yielding funds. Today we’re going to zero in on a 13%-yielder that’s at the center of the action: the tech-focused BlackRock Innovation and Growth Term Trust (BIGZ).

Yes, the fund focused on tech. So the pullback in American AI stocks on news that Chinese AI chatbot DeepSeek, which was launched earlier this month, can rival the latest version of Open AI’s ChatGPT, factors in here, too.

BIGZ is a closed-end fund (CEF) with nearly $2 billion in assets under management—enormous for a CEF (The “BIG” is right in the ticker, after all).… Read more

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We need to talk about tech stocks. Because, yes, there is a risk of a pullback here. But there’s also a way for us to minimize that risk—and grab 8%+ dividends, plus price upside, as we do so.

First off, let me be clear that when I say “tech stocks,” I’m using the NASDAQ 100 as my benchmark. The index is about 60% tech, compared to about a third for the S&P 500. That higher level of tech exposure has allowed the NASDAQ to handily beat the S&P 500 over the long run (see the purple line below, showing the benchmark NASDAQ index fund).… Read more

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One often-overlooked way for closed-end funds (CEFs) to give us a profit boost is for management to buy back a fund’s shares.

By now, buybacks are probably familiar to most investors: With “regular” stocks, buybacks reduce a company’s share count, which boosts earnings per share and other per-share metrics, indirectly boosting share prices.

With CEFs, buybacks have a bit of a different effect. With these high-yielding funds, we want to focus instead on how buybacks affect the discount to net asset value (NAV, or the value of a CEF’s underlying portfolio).

Buybacks, Fixed Share Counts Help Management “Control” CEF Discounts

Members of my CEF Insider service know that we love discounts to NAV because they’re the primary indicator of CEF value.… Read more

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I’ve dedicated my career to closed-end funds (CEFs) because in a way, these high-yield investments saved my life: Using these funds to get an 8% income stream from my portfolio gave me the confidence I needed to quit my academic job well over a decade ago.

I started writing about CEFs after that, mostly out of surprise and confusion: Why weren’t these reliable income plays—which yield 8.2% on average now—more popular?

Well, after over a decade of talking to economists, bankers, fund managers and other experts, I’ve come to realize they should be more popular, and that they probably would be after a big shock to markets made them irresistible.… Read more

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I’ve been covering closed-end funds (CEFs) for more than a decade. Through that time (and still today!) I’ve been shocked at how many people sleepwalk right past these incredible income plays, and the big dividends (and upside) they offer.

CEFs are publicly traded and highly regulated, like mutual funds or ETFs. The key difference? Big dividends! The 500 or so CEFs out there yield 8.4% on average, and they’ve historically have yielded 7%+.

They work by investing in the kinds of assets most of us own already—stocks, bonds and real estate mostly. They then hand out the resulting profits as dividends.… Read more

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The first week of 2024 was a rough one for stocks—and that, oddly enough, suggests we might see a good year for stocks in 2024.

But as we’ll discuss below, recent market moves also suggest some parts of the technology sector are starting to look just a little overbought now—especially one 6.2%-yielding tech-focused closed-end fund (CEF).

I know that’s a lot to lead off with, so let’s break it down.

A week and a half before Christmas, and before last year’s Santa Claus rally, I wrote that we didn’t want a Santa Claus rally to end ’23. That’s because these year-end market bounces have historically led to the following year to be weaker for the markets.… Read more

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Stop me if you’ve heard this one: “If you buy a high-yielding investment, your big yield won’t last because they’ll cut dividends.”

I hear it a lot, so let’s talk about two funds that haven’t cut distributions in the last decade. In fact, these closed-end funds (CEFs), yielding 9% and 10%, respectively, have done the opposite, growing payouts and dropping special dividends, too!

High-Yield CEF No. 1: A “One-Click” Way to Get a Growing 9% Payout From Tech

One of my favorite CEFs comes from the biggest fund manager on earth: BlackRock, with more than $10 trillion of assets under management.… Read more

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Not many people know this, but you can actually “magnify” the return of a regular stock—just by holding it through a closed-end fund (CEF)!

That’s in addition to getting a much bigger dividend than the typical S&P 500 stock dribbles out: 7%+ payouts are, of course, common in the CEF space.

So how does our CEF “gain magnifier” work?

It comes down to what at first blush seems to be a rather obscure fact: CEFs (which trade on the market, just like stocks or ETFs), generally have a fixed number of shares for the entirety of their lives. That means their market price can be different from their per-share net asset values (NAV, or the value of the stocks they hold in their portfolios).… Read more

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From what I can see, this year is setting up to be another 2016—and that’s likely to hand us a buying opportunity in our favorite high-yield investments: closed-end funds (CEFs).

Here’s what I mean: after the market’s fast run higher in January, things have stalled out a bit. After the year we put in last year, this means we’re still left with some decent discounts to net asset value (NAV) on CEFs, as well as high yields (as CEF veterans know, payouts of 7% and up are common in the space, and most CEFs pay dividends monthly, too).

Right now, for example, our CEF Insider portfolio boasts a number of double-digit yields, reaching up to 12.3%.… Read more

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