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I have several positions in Business Development Companies (BDCS) right now as they are attractive for a variety of reasons.

Advantages of BDCs:

  • Pay high yields of 7-11 percent
  • Are filling a liquidity void for small and medium sized firms as banks pull back on lending to these sectors
  • Can raise money at attractive rates right now

One of my favorite BDCs is Hercules Technology Growth Capital (HTGC). It has been a winner since I bought it earlier in the year and based on recent events, I think it has further capital appreciation ahead of it along with its juicy yield.

Key recent events:

  • Robert W Baird initiated coverage on HTGC with an "outperform" on April 11th. This follows an upgrade by Stifel Nicolaus to a "Buy" in February.
  • A record number (6) of HTGC's portfolio companies achieve liquidity events in the first quarter. 4 had successful IPO's, one was acquired and another announced it will be acquired.
  • The company was able to price $43mm in unsecured notes at an attractive yield of 7%.


Hercules Technology Growth Capital - "Hercules Technology Growth Capital, Inc. is a private equity, venture capital, and venture debt firm specializing in providing debt and equity to privately held venture capital and private equity backed companies and select publicly-traded companies". (Business Description from Yahoo Finance)

4 additional reasons I would still buy HTGC ahead of earnings (May 8th) at $11 a share:

  • HTGC yields 8.4% and it raised its distribution by 5% on the last payout in March.
  • Insiders made additional share purchases in March and have been net buyers over the last six months.
  • Analysts still have over 20% revenue growth expectations for both FY2012 and FY2013.
  • The stock is selling at under 10 times forward earnings and just 10% over book value.
Source: This 8% Yielder Is Hitting On All Cylinders