Stock Analysis & Valuation BlackRock Science and Technology Trust II (BSTZ)

• Previous Close: $22.38
• Sector Valuation Confidence Level: High

Valuation method	Value, $	Upside, %
Artificial intelligence (AI)	289.69	1194
Intrinsic value (DCF)	24.07	8
Graham-Dodd Method	34.62	55
Graham Formula		n/a

Strategic Investment Analysis

Company Overview

BlackRock Science and Technology Trust II (BSTZ) is a closed-end equity mutual fund managed by BlackRock Advisors, LLC, focusing on global public equity investments in the science and technology sectors. Launched in June 2019 and domiciled in the U.S., BSTZ targets growth stocks across all market capitalizations, offering investors exposure to innovative companies driving technological advancements. As part of BlackRock’s extensive asset management portfolio, BSTZ benefits from the firm’s deep research capabilities and sector expertise. The fund’s strategy aligns with the growing demand for tech-driven investment opportunities, positioning it as a compelling option for investors seeking diversified exposure to high-growth segments like AI, cloud computing, and biotechnology. With a market cap exceeding $1.3 billion and a strong dividend yield, BSTZ combines capital appreciation potential with income generation, making it relevant in both growth and income-focused portfolios.

Investment Summary

BSTZ presents an attractive investment proposition for those seeking targeted exposure to the science and technology sectors through a professionally managed closed-end fund. Its diversified portfolio mitigates single-stock risk while capitalizing on secular growth trends in tech. The fund’s robust net income ($272.3M in the latest period) and EPS ($3.77 diluted) reflect effective management, though its high beta (1.52) indicates sensitivity to market volatility. The absence of leverage (zero debt) is a positive, but the minimal cash position ($71K) limits liquidity flexibility. The 6.5% dividend yield (based on $2.61/share payout) enhances total return potential, though investors should note the fund’s premium/discount dynamics common to CEFs. Sector concentration in tech—while offering growth—increases cyclical risk.

Competitive Analysis

BSTZ differentiates itself through BlackRock’s institutional-scale research platform and active management in a space dominated by passive tech ETFs. Unlike index funds, BSTZ can overweight emerging tech themes (e.g., quantum computing, genomics) and avoid overvalued mega-caps. Its closed-end structure allows for patient capital deployment without redemption pressures, though this comes with the challenge of trading at premiums/discounts to NAV. Competitors like ARK Invest funds take more concentrated bets, whereas BSTZ’s broader mandate provides stability. The fund’s global scope (vs. U.S.-centric peers) offers geographic diversification but introduces currency risks. BlackRock’s brand and distribution network provide an edge in attracting assets, though fee compression in asset management pressures profitability. BSTZ’s term trust structure (uncommon among peers) provides eventual liquidity optionality—a unique selling point.

Major Competitors

• ARK Innovation ETF (ARKK): ARKK’s disruptive tech focus overlaps with BSTZ but takes higher-conviction positions in unprofitable growth companies, leading to greater volatility. Its active ETF structure offers daily liquidity but forces less flexible portfolio management. ARKK’s weaker recent performance highlights BSTZ’s more balanced approach.
• Technology Select Sector SPDR Fund (XLK): XLK provides passive exposure to large-cap U.S. tech at lower fees (0.10% expense ratio vs. BSTZ’s ~1.0%). However, BSTZ’s active management can outperform during market rotations, and XLK lacks BSTZ’s small/mid-cap and international holdings.
• Invesco QQQ Trust (QQQ): QQQ tracks the Nasdaq-100, offering liquid, low-cost tech exposure but with heavy weighting toward FAANG+ stocks. BSTZ’s broader sector definition (including biotech, industrial tech) and active stock-picking provide differentiation, though QQQ’s liquidity is superior for traders.
• Firsthand Technology Opportunities Fund (TEFQX): This actively managed tech CEF competes directly with BSTZ but has underperformed due to excessive micro-cap exposure. BSTZ’s institutional backing and larger AUM provide better research resources and tighter bid-ask spreads.