It accomplishes this goal by investing in various financial instruments that pay out income. Its portfolio consists of bank loans, high-yield corporate debt, investment-grade bonds, asset-backed securities, preferred stock, municipal bonds, and other income-paying securities. It charges an expense ratio of 1.83% of assets under management (AUM).
The fund has a net asset value of about $17 per share and trades at a premium to that NAV of about 14%. The historical premium to NAV is around 13.66%. When a fund is trading at more of a discount than usual (or less of a premium) it represents a good buy.
But that’s not the only thing we can use to determine the best times to enter a CEF. These kinds of investments usually trade in a very tight channel.
When a CEF is at the top of that channel, it’s likely at the top of its price range and won’t go much higher. And conversely, when a CEF is toward the bottom of its channel, it can be a great time to buy so you can add capital appreciation to your income. That’s where we find ourselves with the Guggenheim Strategic Opportunities Fund.
Ignoring a couple of market crashes, this fund likes to trade in a range between $18 and $22. It’s dipped down as far as $15 during crashes, but it’s always come back up to its preferred range. And right now it’s sliding down toward the bottom of that range. And it’s looking like a very attractive buy.
There’s a chance it could fall further, but it’s not likely to fall much further than $15. And it’s got that sweet 11% payout (that comes every single month) to make up for any short-term stumble it might take. We’re adding the Guggenheim Strategic Opportunities Fund to the model portfolio with a buy limit of $19.50 and a 12-month price target of $22.50.