Stock Analysis & Valuation Liberty All-Star Equity Fund (USA)

• Previous Close: $6.06
• Sector Valuation Confidence Level: High

Valuation method	Value, $	Upside, %
Artificial intelligence (AI)	30.12	397
Intrinsic value (DCF)	5.23	-14
Graham-Dodd Method	11.70	93
Graham Formula	25.68	324

Strategic Investment Analysis

Company Overview

Liberty All-Star Equity Fund (NYSE: USA) is a closed-end mutual fund managed by ALPS Advisers, Inc., with co-management from leading investment firms including Aristotle Capital Management, Pzena Investment Management, and TCW Investment Management. The fund invests in a diversified portfolio of U.S. large-cap equities, targeting both value and growth stocks across multiple sectors. With a strategy benchmarked against major indices like the S&P 500 and NASDAQ Composite, Liberty All-Star Equity Fund aims to deliver long-term capital appreciation and income through dividends. Established in 1986, the fund provides investors with exposure to high-quality U.S. companies while leveraging the expertise of multiple asset managers. Its focus on large-cap stocks makes it a stable option for investors seeking diversified equity exposure in the financial services sector. The fund’s performance is closely tied to broader market trends, given its beta of 1.071, indicating slightly higher volatility than the market.

Investment Summary

Liberty All-Star Equity Fund offers investors a diversified, multi-manager approach to U.S. large-cap equities, blending value and growth strategies. With a solid track record since 1986 and a dividend yield supported by its $0.68 per share payout, the fund appeals to income-focused investors. However, its reliance on market performance (beta of 1.071) introduces moderate risk, particularly in volatile economic conditions. The absence of leverage (zero total debt) is a positive, but the lack of cash reserves could limit flexibility. The fund’s performance is highly correlated with major indices, making it a proxy for broad U.S. equity exposure rather than an alpha-generating vehicle. Investors should weigh its steady dividend against potential market-driven fluctuations in net asset value.

Competitive Analysis

Liberty All-Star Equity Fund differentiates itself through a multi-manager structure, distributing investments across five sub-advisors with distinct strategies (value, growth, and core). This diversification reduces single-manager risk but may dilute outperformance potential. The fund’s large-cap focus aligns it with passive index funds, though its active management aims to add value through stock selection. Its competitive edge lies in the combined expertise of its sub-advisors, but this comes with higher expense ratios compared to ETFs. The fund’s closed-end structure provides stable capital but can trade at premiums/discounts to NAV, adding another layer of risk. While it benchmarks against the S&P 500, its performance is unlikely to deviate significantly, making it a middle-ground option between active and passive strategies. The lack of international exposure or alternative assets limits its appeal in diversified portfolios.

Major Competitors

• SPDR S&P 500 ETF Trust (SPY): SPY is the largest S&P 500 ETF, offering ultra-low fees and pure index exposure. It outperforms USA on cost efficiency but lacks active management. Ideal for investors seeking passive large-cap exposure without USA’s higher expense structure.
• iShares Core S&P 500 ETF (IVV): Similar to SPY, IVV tracks the S&P 500 with minimal fees. It competes directly with USA’s benchmark alignment but provides no active management benefits. Its liquidity and lower costs make it a strong alternative.
• Vanguard Dividend Appreciation ETF (VIG): VIG focuses on dividend growth stocks, overlapping with USA’s income strategy. It has lower fees and a strong track record but lacks USA’s multi-manager approach. Better for cost-conscious dividend investors.
• Dodge & Cox Stock Fund (DODGX): An actively managed large-cap value fund, DODGX competes with USA’s value segment. It has a long history of outperformance but is more concentrated. USA’s diversification across managers may appeal to those wary of single-team risk.
• American Funds Growth Fund of America (AGTHX): AGTHX is a growth-oriented competitor with a massive AUM base. It rivals USA’s growth allocations but has higher fees. USA’s smaller size may allow for more nimble positioning.