Eaton Vance Tax-Managed Buy-Write Income Fund (ETB) Stock

Eaton Vance Tax-Managed Buy-Write Income Fund is undervalued, trading at a -7% discount to NAV, despite a robust performance in 2024 and a history of trading at a premium. ETB closely tracks the S&P 500 via its holdings, and benefits from high volatility due to its short-dated, at-the-money options strategy. The fund's long-term stable NAV and 8.8% distribution rate make it a compelling alternative to an outright S&P 500 position, especially in a volatile market.

Eaton Vance Tax-Managed Buy-Write Income Fund offers high-income potential and inflation protection through equity investments. The ETB closed-end fund yields 9.21%, outperforming peers in the same Morningstar category. The fund strategy involves owning stocks and selling index call options, with high exposure to technology stocks, potentially risky in current market conditions.

Eaton Vance Tax-Managed Buy-Write Income Fund has continued to outperform First Trust Enhanced Equity Income Fund (FFA) as anticipated. ETB remains undervalued and remains a good option for portfolio addition. All Eaton Vance equity CEFs, including ETB, recently increased their distributions.

The Eaton Vance Tax-Managed Buy-Write Income Fund provides income-seeking investors with a chance to generate substantial income and potential capital gains. With a yield of 9.63%, ETB compares favorably to its peers. While the fund has lagged behind the S&P 500 Index in performance, investors have still enjoyed a total return of 10.70% when factoring in distributions.

Both the Eaton Vance Tax-Managed Buy-Write Income Fund and the First Trust Enhanced Equity Income Fund implement an options writing strategy but carry it out in different ways. They both deliver respectable distribution yields, with ETB paying monthly and FFA paying quarterly. However, the valuation difference between the two makes ETB look much more appealing on both an absolute and relative basis.

This happened in the fall of 2008 during the toxic mortgage crisis and in March 2020 during COVID-19. You see CEF shareholders sell at any price just to get out. Though this year has been more of a slow-motion crash in equity CEFs, that's not to say that we won't get a spike down sell-off that could see CEFs briefly hit -25% discounts or more. We had a name for when that happened. We'd call it the "dumb stage" of a market sell-off, and it could last one or two days before a recovery.

Eaton Vance Tax-Managed Buy-Write Income Fund writes call options to boost its income. ETB distributes 8% on the current market price to its income seeking unitholders. The closed-end fund has left us impressed, but we still do not recommend a buy at this point in the cycle.