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Follower ○○

PHK, HFRO, and BHV

I like the play the discount premium game, it's served me very well over the years. Right now, I'm looking at HFRO, PHK, and BHV. 

HFRO is selling at a historically high discount to NAV, and it has $40 million about to be added to NAV based on a legal judgment at Credit Suisse.

The other Pimco funds have started to drift closer to their historic premiums, but PHK has actually drifted to a lower premium than it had recently, only 3% when it will almost certainly settle at 15% or more.

BHV is thinly traded, but I've followed it for years and it almost always trades at a nice premium, it can now be purchased at discount. The only other Va. muni bond fund is selling a historically low discount, while BHV is usually at a premium and is now at a discount. This is anomalous.

Thoughts?

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9 Replies
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Contributor ○

Re: PHK, HFRO, and BHV

The Texas supreme court upheld the $40 million fraud verdict for Claymore not HFRO. HFRO is not the only shareholder of Claymore stock. The $40 million would be split between all Claymore shareholders based on the amount the own, not all to HFRO.

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Follower ○○

Re: PHK, HFRO, and BHV

My recollection was that HFRO got $28 of the award, but also prejudgment interest and the like, raising it to $40 million, though not final until the trial judge issues an order on remand. I may be remembering incorrectly. If so, doesn't HFRO get something like 80% of the award in any event?

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Contributor ○

Re: PHK, HFRO, and BHV

If one assumes that NHF and HFRO own all of the shares of Claymore, then on 12/31/2019 HFRO would own just over 80% of them. From the 12/31/2019 shareholder reports:

Claymore shares owned by HFRO: 9,370,190

Claymore shares owned by NHF: 2,019,369

Total shares owned by HFRO and NHF combined: 11,389,559

 

I'm not sure if it's safe to assume that HFRO and NHF own all the shares though. From the 12/31/2017 shareholder reports:

Claymore shares owned by HFRO: 7,591,418

Claymore shares owned by NHF: 1,636,026

Total shares owned by HFRO and NHF combined: 9,227,444

 

So it could be that the number of Claymore shares grew for some reason. Otherwise, could imply at least one other owner of Claymore shares.

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Follower ○○

Re: PHK, HFRO, and BHV

In any event, from a discount/premium perspective, seems much to like in a CEF that is very close to its largest discount ever, and is over a 50% gain away from it's lowest discount in the past year. It's a little concerning that it could misvalue some its private holdings, but a 40% or so discount to NAV gives a lot of wiggle room there.

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Follower ○○

Re: PHK, HFRO, and BHV

Meanwhile, if someone has thoughts as to why PHK has been such a laggard in its premium other than randomness, I'd love to hear them.

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Explorer ○

Re: PHK, HFRO, and BHV

Keep in mind the Virtus Herzfeld Fund (VHFIX) is in a liquidation mode.  As of the 3/31/20 report, HFRO was the largest holding at 11.76%.  This may account for some of the large discount and my keep pressure on the market price until this liquidation has completed.

Effective August 5, 2020, the fund will be closed to new investors and additional investor deposits. On or about August 18, 2020, the fund will be liquidated.

https://www.virtus.com/products/herzfeld#shareclass.I/period.quarterly

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Follower ○○

Re: PHK, HFRO, and BHV

But the fund only had around $15 million in total assets, so liquidating its holding in a fund that trades $10 million or so, wouldn't have much effect?

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Explorer ○

Re: PHK, HFRO, and BHV

Good luck with your z trading strategy. I think it can work if u are patient but BHV's liquidity is modest in the extreme. The underlying performance it has shown over the years is not likely to provide much support for the strategy as its mostly lagged behind NPV since Nuveen consolidated its two other Va cefs into NPV several years ago now.

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Follower ○○

Re: PHK, HFRO, and BHV

That's all true... but it didn't stop the discount/premium divergence between BHV and NPV being the same 10 points or more it has been for years very recently. It's possible that investors have suddenly woken up to NPV's better performance. But after following CEFs for over 20 years, such sudden shifts in sentiment are rare, and things usually regress to the mean fairly quickly.

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