Blowout earnings last week from Nvidia Corp (NVDA) should have sent shares of NVDA soaring, with other semiconductor chip, tech, and A.I.-related stocks coming along for the ride – but that didn’t happen. Instead, NVDA gave back all its overnight gains and is now trading below where it closed prior to releasing its Q2 2023 results.

At this point, the market looks like it’s running out of gas and needs a catalyst before it can breakout to new highs.

With inflation still well above the Fed’s 2% target, and the Central Bank floating another potential rate hike, we’re likely not going to see that catalyst come by way of the Fed lowering rates.

Because of that uncertainty, and the lack of a catalyst on the horizon, it’s important to have income in your portfolio to help offset any pullback in stocks.

This week I’m watching Neuberger Berman Next Generation Connectivity Fund Inc (NBXG), a closed-end fund that invests in equity securities issued by U.S. and non-U.S. companies that demonstrate significant growth potential related to the fifth generation (5G) mobile network and future generations of mobile network connectivity and technology.

By this point, everyone has heard about 5G, but I’m not sure everybody really recognizes the profit potential in the 5G space.

Global 5G services market size was valued at USD 60.61 billion in 2022 and is expected to expand at a compound annual growth rate (CAGR) of 59.4% over the next seven years to a massive $2.21 trillion by the end of 2030, according to Grandview Research.

Those are serious numbers and they’re going to play into the strength of NBXG’s portfolio composition in which information technology and communications represent the top two sectors with weightings of 61.4% and 6.8%, respectively.

Regarding the holdings, 78.3% of the NXBG portfolio is made up of public stocks, 15% of the portfolio is comprised of private/restricted assets, and 19.4% of the portfolio is in overwritten options.

Speaking of the options, NBXG uses a defensive option-income strategy, which brings in income by writing options against its stock portfolio positions. That’s where it gets a lot of the income that it can then pass along to shareholders.

As I write this, NXBG is trading at a significant 18.38% discount to its NAV – and it’s delivering a very healthy 11.59% yield.

I like that. It means you get to invest in the multi-year 5G trend at a significant discount, and get paid while we hold shares.

— Shah Gilani

Source: Total Wealth