Nuveen Core Equity Alpha Fund: JCE Difficult to Recommend at Current Price

The Nuveen Core Equity Alpha Fund (NYSE:JCE) is a closed-end fund that may appeal to income-seeking investors who want to retain equity exposure for potential returns and inflation protection. However, the fund's current price makes it difficult to recommend at this time.

The Nuveen Core Equity Alpha Fund (NYSE: JCE) is a closed-end fund that may appeal to income-seeking investors who wish to retain exposure to the greater potential returns and superior inflation protection that equities provide over fixed-income securities while still earning a high level of current income. The fund boasts an attractive 8.82% yield at the current share price, substantially higher than the current 1.26% yield of the S&P 500 Index (SPY) [1].

Comparatively, the fund's yield is reasonable when benchmarked against its peers. The median yield of seven domestic equity closed-end funds is 9.20%, and the Nuveen Core Equity Alpha Fund is below this level. However, it remains one of the highest-yielding assets in the market today. For instance, even the highest-yielding dividend stocks in the S&P 500 Index, such as Dow Inc. (DOW) with a 9.20% yield, cannot match the fund's yield [1].

Despite its attractive yield, the fund's trailing ten-year total return has been less impressive. The Nuveen Core Equity Alpha Fund has a trailing ten-year total return of 164.76%, which is below the 221.36% total return of the S&P 500 Index over the same period. While not the worst-performing fund in its peer group, it has underperformed several of its peers, such as the Adams Diversified Equity Fund and the Central Securities Corporation, which have managed to beat the S&P 500 Index [1].

The fund's strategy involves investing in large-cap U.S. common stocks using a proprietary quantitative process to potentially deliver long-term outperformance. However, the fund also sells call options with a notional value of up to 50% of its equity portfolio to enhance risk-adjusted performance. This strategy, while different from many of its peers, might have contributed to its underperformance compared to funds that do not write options [1].

The Nuveen Core Equity Alpha Fund's largest holdings include several familiar names, such as Apple (AAPL), Microsoft (MSFT), and Amazon.com (AMZN), which have delivered substantial returns over the past decade. However, the fund's reliance on options writing could have reduced its returns during periods of market growth, potentially contributing to its underperformance [1].

In conclusion, while the Nuveen Core Equity Alpha Fund offers an attractive yield, its performance history and strategy of writing call options may make it a less appealing choice for investors seeking high returns. Income-seeking investors should carefully consider the fund's historical performance and strategy before making an investment decision.

References:
[1] https://seekingalpha.com/article/4781705-jce-difficult-to-recommend-at-current-price