The word “vibecession” — basically the idea that people are measuring the economy by feeling rather than by data — is back in the news. That’s because most Americans apparently think we’re in a recession, even though we aren’t. Which brings us to a Closed End Fund nicely positioned to profit from this situation: The Liberty All-Star Equity Fund (USA), outlines Michael Foster, editor of CEF Insider.
It is, frankly, annoying to those of us who make our decisions on the data alone. But, as they say, it is what it is. So we’re going to go ahead and profit from it!
USA focuses on high-quality US firms with strong cash flows. USA recently paid a 9.7% dividend, and it does something no ETF ever does: Trades at a 2.5% discount to net asset value (NAV, or the value of its portfolio).
As members of my CEF Insider service know, these discounts are one of our main reasons for buying CEFs. They exist because CEFs generally have a fixed share count for their entire lives, so can (and regularly do) trade at different values in relation to their portfolios.
Liberty All-Star Equity Fund (USA)
To say USA is well established would be an understatement: It was founded back in 1986 and has put up a stellar 3,000%+ return ever since. Management has built this record on the strength of great firms that are directly benefiting from the income and spending trends of individual Americans and US companies — firms like Capital One Financial Corp. (COF), Visa Inc. (V) and, of course, today’s AI-powered performers, Microsoft Corp. (MSFT) and Nvidia Corp. (NVDA).
The beauty of investing in USA is that it essentially “translates” the profits from its stock gains into dividends by selling shares systematically, taking profits, and strategically rotating the portfolio over the long term. Its policy is to pay around 10% of NAV per year as dividends.
This allows you to profit from stock-market gains without having to sell your shares. And since USA’s dividend (which does float a bit, due to changing NAV) has actually risen by 80% in the last decade, it’d be absurd to fear that this fund is unsustainable just because the yield is high. In fact, I’ve heard this fear about USA in the near decade I’ve written about CEFs, and it’s never come to fruition.
Recommended Action: Buy USA.
