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At what discount would you consider buying FEO?

BWG
edited June 2013 in Fund Discussions
FEO discount has now come down to - 11.58. In late 2008/early 2009 it had reached 20%. The historical discount has been in the single digits.

I am using the discount size as a contrarian signal..an indication of a 'blood in the streets' moment. Seems early yet.

BWG

Comments

  • BWG, thanks for the reminder about FEO. I watched and watched it for about a year and a half looking for an entry point & then forgot about it. It's back on watch from today. Yes, does seem a little early ... don't have an opinion on when to buy yet. I'm trying to get myself to wait till there's at least some indication of bottom/reversal before deploying cash, but I already broke that resolution on one ETF.
  • If you haven't done so already, you might look at http://www.ftportfolios.com/Retail/Cef/CefPriceHistory.aspx?Ticker=FEO. It displays the NAV/market/discount by month, but you can download the history of the fund back to June 01, 2007. The "blood in the streets discount" in late 2008 and early 2009 was between 25-32%. The historic average is a bit over 10% but that includes the meltdown years. If you're skeptical of living through another once-in-a-century event, you might want to calculate the pre- and post-crisis averages as your benchmark: pre-crisis (just a few months of data are available) was in the low teens, post crisis has averaged 8.1%. Morningstar's three-year average is 6.1% and last trade was 11% or so.

    From this point, then, the discount might reasonably double. It might contract but likely by a few points (down to the 6-8% range).

    For what interest it holds,

    David
  • Hi BWG,

    I have looked at FEO in the past, but I have never pulled the trigger. This CEF has performed well over the long haul, but it has a highish expense ratio and is relatively thinly traded. Right now, I would monitor the moving averages and would only consider buying it if the price was on an upward trajectory. Buying right now may turn out to be catching a falling knife.

    Kevin
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