Hawking Portfolio Review – 31 December 2021

Typical Rhine Scenery, Germany

The Hawking Portfolio is an “Income” portfolio constructed from a diversified selection of high yielding Closed-End-Funds (CEFs) that pay regular weekly or monthly dividends/distributions that can either be withdrawn for “income” or re-invested for compounded growth.

Performance for 2021 looks like this:

with a very respectable 17.5% return – lower than the high perf0ming US equity markets but ~6% higher than our diversified benchmark equity/bond fund (AOR).

Current holdings are shown in the following screenshot:

where we see holdings in 29 CEFs. Total dividend yield for 2021 was ~6.5% – slightly below my 8% target but very reasonable especially allowing for the fact that it took me ~3 months to go from 50% invested to 100% invested.

As I’ve reported in recent posts – https://itawealth.com/hawking-portfolio-review-1-december-2021/ (including in the comments section) – a number of TSLOs have been hit over the past month or so even though these were set at the ~3SD level. This is unusual activity and I can really 0nly explain it as caused by year-end profit taking and/or tax loss selling (although not likely too much of this). The CEF market place does not trade as efficiently as common ETFs – and this provides good investment/trading opportunities – and can be more volatile. Since a number of my TSLOs were hit on extraordinary transitory (down) spikes it looks as though these may have been caused by major institutional players clearing out all the stop-loss orders sitting in the order books. Some of the spikes also followed the payment of “special dividends” – large distributions payed from growth profits and a common feature in the CEF space. Whatever the reason, this presents another example of why I don’t like TSLOs – even at the 3SD level, that I thought would be wide enough to avert the aggravations of early exits.

The latest CEF to be hit (beyond those noted in the above link) was CIF – a good example of selling low 🙁 ?

However, this has given me an opportunity to add new Funds to the quiver with the latest of these being SuRo Capital Corp (SSSS).  This is a difficult fund to evaluate – note the 61% yield shown in the above screenshot. This is obviously not a reasonable number but comes from large payouts made over the past 12 months – consensus (from CEF specialists at Seeking Alpha) seems to be that something like 11% might be reasonable. The fund is held by a number of well respected institutions/hedge funds. I have added this to my holdings in addition to a position in ACP.

Projected portfolio income is calculated at 9.72% in the above screenshot but this is distorted by the 61% return for SSSS – however, levelling this to ~11% still leaves the projection at ~8%.

I will keep the 3SD TSLOs in place for now but will lift them before next December (if I remember) when we might expect to see more spikes.

David