JEPI stock is lagging: Is this 11% yield covered call ETF a buy?

on Jun 6, 2023
  • The JP Morgan Equity Premium Income ETF has moved sideways.
  • The fund has jumped by just 7% this year while QQQ has risen by double-digits.
  • Technicals show that the fund has minimal upside in the near term.

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The JP Morgan Equity Premium Income ETF (JEPI) stock price has moved upwards this week and is now approaching the highest point this year. JEPI was trading at $54.41, a few points below the year-to-date high of $54.87. It has jumped by more than 7% from its lowest point this year and ~17% above the lowest point in 2022.

JEPI is underperforming

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JEPI is one of the most popular ETFs by JP Morgan, the biggest bank in the United States. It is an expensive fund with an expense ratio of 0.35% and over $26 billion in assets. The fund is loved by investors because of its dividend yield, which stands at about 11.10%. This yield is bigger than the US high yield of 8.50% and the global REIT of ~4.50%. Most importantly, JEPI pays its dividends monthly.

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JEPI is an actively managed fund that focuses on a defensive equity portfolio across the board. Unlike other popular funds, JEPI is a covered call ETF, which provides a short-term hedge on a long stock position. For example, you can buy a stock at $25 and then sell a call at $27. In this case, if the stock does not cross $27, it means that the buyer has captured the premium.

The biggest companies in the fund are Microsoft, Amazon, Adobe, Hershey, Alphabet, Mastercard, and Pepsico among others. Most of the companies in the ETF are in the IT sector followed by health care, financials, and consumer staples among others.

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Despite its high dividend yield, JEPI has underperformed the key dividend-focused ETFs like the SCHD and DGRO. It has also lagged other popular funds like the Invesco QQQ, DIA, and SPDR S&P 500 ETF among others.

Looking ahead, the biggest concern for JEPI and other American stocks is the ongoing liquidity risks as the Fed continues with its quantitative tightening process.

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JEPI ETF stock forecast

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JEPI chart by TradingView

The 4H chart shows that the JEPI ETF has moved sideways in the past few weeks. In this period, the fund has struggled to move above the key resistance point at $54.90, the highest point on May 1. The fund has moved slightly above the important resistance level at $54.15 (December 16 high).

The ETF has remained above the 25-period and 50-period exponential moving averages (EMA) and the ascending trendline. Therefore, the fund will likely continue rising as buyers target the next key resistance at $54.90. A move above that level will see it rise to the next key level at $55.11, the highest point in April 2022.

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