Funds Trading At Extreme Premiums/Discounts

One of the screens we like to run is funds that are trading at an extreme to their net asset value (NAV). Closed-end funds (CEF) are often driven to premiums or discounts to their underlying value according to demand from retail investors, and when they reach an extreme, can be an effective contrary indicator.

Because of their structure, ETFs don’t often trade at extreme premiums or discounts, and they’re not always related to sentiment when they are, but still when we see a fund trading with a temporary dislocation to its underlying value, it can present an opportunity to see it move the other way.

The tables below show ETFs and CEFs trading at a 52-week high or low premium/discount to their net asset value. Watching these screens can present interesting trading opportunities and sometimes a way to catch overriding themes.

The number of muni funds trading at year-high premiums dropped significantly from last week even as the sector had a decent week.

The most notable fund trading at a discount is TWN, a CEF that invests at least 75% of its assets in stocks trading on the Taiwan Stock Exchange. It has traded at a larger discount in its history, primarily prior to 2003. Since then, it has traded at this large of a discount a handful of times, typically leading to rallies. It's a place to start for anyone looking to get exposure to that particular niche.

Among ETFs, there are a couple of biotech funds trading at 52-week high premiums but with the sector getting hit today, those premiums will disappear.