Nuveen Municipal High Income Opportunity Fund (NMZ) Stock

NMZ's primary goal is high current income exempt from federal tax, with a secondary goal of attractive total return. Despite NMZ's recent equity-like returns, I recommend a "hold" due to potential market breather and better future entry points. Given the fund's strong momentum and increased valuation, a more cautious approach is warranted heading into 2025.

I evaluate Nuveen Municipal High Income Opportunity Fund as an investment option in light of recent income boosts and declining inflation metrics. The fund still has a sharp discount to NAV, supporting a bullish view. Illinois bonds make up a good chunk of the overall portfolio. These issues are benefiting from an on-time budget, rising taxes, and an upgrade to "stable" from credit rating agencies for the state.

I am maintaining a "buy" rating for the Nuveen Municipal High Income Opportunity Fund for multiple reasons. The fund is benefiting from a decline in long-term muni issuance and from a Fed pause in rate hikes. NMZ holds many non-rated bonds, but I still feel this is a safer option than going into junk rated corporates.

Nuveen Municipal High Income Opportunity Fund offers a 5.13% yield, which is equivalent to an 8.14% yield for investors in the top tax bracket. The NMZ closed-end fund's shares have declined by 16.33% over the past five years, performing poorly compared to the ICE AMT-Free US National Municipal Index. The fund invests in municipal securities rated Baa/BBB or lower, with a significant portion invested in unrated securities, which poses some risk.

I see the Nuveen Municipal High Income Opportunity Fund as a reasonable investment option for the right buyer at these levels. NMZ has performed well in a risk-on market environment and should continue to do so. There is still a discount to NAV present for NMZ and the fund's use of leverage is less of a problem if inflation continues to decline.