Stockchase Opinions

Larry Berman CFA, CMT, CTA FIRST ASSET TECH GIANTS COVERED CALL ETF TXF-T BUY ON WEAKNESS Nov 14, 2022

Likes tech exposure, but expect lots of volatility. Expecting another low in the markets, but is a good long term investment. Good time to add a small position.
$14.300

Stock price when the opinion was issued

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WEAK BUY
Certain amount of risk because they're tech giants. With covered calls, you're always giving up some of the growth. You might be better off buying something that's broader based. But if you're willing to accept the risk, then go ahead.
COMMENT
A 75-year-old holding this. Hold no more than 10% of your portfolio in anything this volatile at this age. It's a fine ETF though.
BUY ON WEAKNESS
Big cap tech with extra yield from covered calls. Get pretty good premiums since volatility is high. TXF has a covered call. Over-valued right now so wait for a pullback. TXF.B has no currency hedge.
COMMENT
Basket of 25 US tech stocks, equal weight, with a covered call. Yield is about 10%, but going forward it may be closer to 7%. Be aware that much of the yield is a ROC. It's not a straight dividend. He watches the ZWT ETF, market weighted, 65 holdings, more diversified, lower distribution, but it's outperformed TXF this year.
BUY
Nothing wrong with this. Tech is important to own, though will be volatile.
DON'T BUY
The company does some covered calls. One concern is that gold or any commodity is risky, so he wants the full benefit of that risk in return. A covered call on a commodity limits the upside (though he really likes covered calls in general). TXF pays a 9% dividend yield--it looks wonderful, but below the surface could lie risk.
PARTIAL SELL
A hedged ETF will not have any impact on US assets since the currency is hedged. If inflation is more persistent, then the Fed will have to be more reactionary. This will cause an unexpected upward movement in interest rates, which will lead to these assets to underperform. Good strategy to extract yield from a sector with low yield. Not the best time to start a new position. Would trim some exposure.
DON'T BUY
You should not invest just for a high dividend. The tech sector in the late cycle where interest rates rise, will underperform. He is underweight technology. You want to see this pullback significantly before dipping in. The dividend is volatile and is driven by the premium from the underlying stock price.
DON'T BUY
Very strong yield on product, but involves risk of investing in tech. Better places to earn consistent yield.