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  • Does Smart Beta Equal Smart Asset Allocation? [View article]
    Good article. One counterpoint that readers should consider is that during this time period growth outperformed value materially. The RAFI indices are designed to capture the value premia, so given that they kept up and slightly edged the market given the relatively high fees of these Powershares ETFs, that is an encouraging early sign. The fees probably need to come down in the long-term to make these alternatives compelling though. It's still very early to judge performance of these SB funds as you say.
    Apr 13, 2015. 09:07 PM | 1 Like Like |Link to Comment
  • Medley Capital: Another Gift From Year-End Tax Loss Selling [View article]
    I'll take a deeper look, thanks. If I like it enough, I may beat you to that article.

    Just out of curiosity, how many positions do you hold at a time? What else do you like here?
    Jan 9, 2015. 11:31 PM | 1 Like Like |Link to Comment
  • Medley Capital: Another Gift From Year-End Tax Loss Selling [View article]
    Yes, not exactly tasteful, but it doesn't effect MCC that I can see, which is a separate corporate entity.
    Jan 9, 2015. 09:09 PM | 1 Like Like |Link to Comment
  • A Focused High Yield ETF: What Could Go Wrong? [View article]
    It just depends on where a fund is trading...

    Blackrock Multi-sector Income (BIT) looks good here with a 12% discount to NAV. Leverage is a tad high at 40%, but the credit quality of the fund is better than your typical high yield fund and more diversified with minimal exposure to energy at the last report date. Dividend of +8%.
    Jan 9, 2015. 04:31 PM | Likes Like |Link to Comment
  • Medley Capital: Another Gift From Year-End Tax Loss Selling [View article]
    Debt to Assets is also higher for TICC at 0.48. That's at the very high end of the BDC universe. Not saying TICC isn't a good investment here, but again, all losses are going to be magnified and TICC doesn't have a lot of wiggle room here.
    Jan 9, 2015. 01:34 PM | 2 Likes Like |Link to Comment
  • Medley Capital: Another Gift From Year-End Tax Loss Selling [View article]
    I appreciate the train of thought... but why don't you make the case for TICC in another article? Then investors can decide after a detailed review if your thesis is good.

    TICC has it's own issues: only 49% of its loans are in a first lien structure as of Q3 2014. 19% is in second lien structures and 29% is in CLO equity. That raises a lot of questions. Personally, I'd be a lot more concerned about TICC's potential credit quality, given the entire structure of its portfolio, than MCC's exposure to energy given that +90% of its book is senior secured with 2/3 in first lien. TICC also has a huge 30% exposure to structured (leveraged) finance that would be worth addressing. At 80% of book value, TICC is probably a good deal (I'd have to research it more closely), but saying it's better than MCC at 0.75x book value is still a case to be made. We can conjecture on oil exposure, but that's far from the only variable/portfolio risk at work here.
    Jan 9, 2015. 01:05 PM | 2 Likes Like |Link to Comment
  • Medley Capital: Another Gift From Year-End Tax Loss Selling [View article]
    I don't disagree that it's a oil & gas exposure is a risk. However, MCC trades at 0.75 of NAV and TICC at 0.80 of NAV. The difference in energy exposure between these two BDCs is priced in by the market already.

    And, TICC looks good here as well.
    Jan 9, 2015. 09:51 AM | 3 Likes Like |Link to Comment
  • Medley Capital: Another Gift From Year-End Tax Loss Selling [View article]
    Medley Capital (MCC) doesn't employ anyone and is externally managed by Medley Management (MDLY), which also manages private BDC (Sierra Income) and a number of other institutional accounts. However, MCC does compensate this team in a number of ways for managing the BDC. But, yes, 80+ people is still higher than usual among peer BDCs and why MCC's operating efficiency ratios look bloated relative to peers.
    Jan 9, 2015. 09:00 AM | 3 Likes Like |Link to Comment
  • Medley Capital: Another Gift From Year-End Tax Loss Selling [View article]
    I modeled a 2/3 decline in fee income in the pro forma and a 19% cut in the dividend and baked that into the valuation. I also modeled a decline in the portfolio yields. PIK income accounts for roughly 10% of total income. A large portion of MCC's portfolio is just now starting to get a little more seasoned, so a slight uptick in defaults is to be expected. I don't see the credit concerns that you cite as abnormal.

    Specifically, what are you looking at in the 2014 10-K that makes you concerned about the Company's credit quality compared to other BDCs?
    Jan 8, 2015. 11:09 AM | 4 Likes Like |Link to Comment
  • Medley Capital: Another Gift From Year-End Tax Loss Selling [View article]
    Thanks for reading. That's the point... I really don't mind if MCC can't raise equity for a while, since the shareholders haven't benefited from growing the book value/assets. There hasn't been any operating leverage to show for it. When a stock trades at a deep discount to NAV, that's a good wake-up call for the management team and Board. In this case, though, the management team has promised repeatedly that it would not raise equity at a discount to book value, which is what actually damages shareholders. That combo at a +25% discount to book makes for a pretty good value in my opinion.
    Jan 8, 2015. 07:33 AM | 3 Likes Like |Link to Comment
  • WhiteHorse Finance: An Orphan BDC At A Deep Discount To Tangible Book Value [View article]
    Good write-up, I agree. There's a lot of good values to pick through in the BDC space now. Diversified high coupon mezz debt of middle market U.S. companies are a steal right now trading at discounts to NAV of 20-25%. You typically don't see that kind of value during a +3% GDP trend rate environment.

    Even if the dividends are cut, some of these BDCs will still yield in excess of 10%. That gives you a total return potential of 30% easily if these BDC's trade close at all to NAV again soon and they're well managed. Where else in this market are you going to find that risk-return? ...without taking on the risk/headache of becoming a distressed investor in the energy patch.
    Jan 7, 2015. 09:13 PM | Likes Like |Link to Comment
  • OHA Investment Corporation: Special Situation In A Busted BDC [View article]
    At a 40% discount to last reported fair value, I think a lot more than a dividend cut is priced in. I get the psychology side of it, but the stock might also pop on a modest dividend cut and there's no guarantee OHA will cut the dividend.
    Jan 7, 2015. 07:56 AM | 1 Like Like |Link to Comment
  • A Focused High Yield ETF: What Could Go Wrong? [View article]
    If you like HY Energy credit, check out OHAI. That will give you HY with a 40% discount baked in to the share price.
    Jan 6, 2015. 06:26 PM | Likes Like |Link to Comment
  • OHA Investment Corporation: Special Situation In A Busted BDC [View article]
    Thanks for reading. Just in response:
    1) I wouldn't assume that all the insider purchases are due to the deal OHA made to become the manager. The insider buys mentioned in the article are stock purchases registered in Glenn August's name. That doesn't prevent OHA from buying $5million outside of what's mentioned above.
    2) Agreed on that point... it's a long term goal if it happens.
    3) I agree with you that energy exposure in the portfolio is the primary risk and this was pointed out in the article. However, I think the stock trades at a large enough discount to justify a good risk-reward now.

    For example, let's assume we had to haircut the entire energy portfolio to 70% of 9/30/14 fair value. Total assets would fall to roughly $225M.

    Assets $225 million
    Liabilities ($93) million
    Net Assets $132 million
    NAV/share $6.40
    Upside: $6.40/$4.60 - 1 = 39% upside, TR of 50% with the dividend.

    That's one scenario and what I would expect as a downside. I still think you come out well ahead under the majority of scenarios. Based on very rough calculations, the entire energy book would have to be marked down 60% (40% of 9/30/14 fair value) before the NAV fell to $4.60ish.

    Waiting for the 10-k, we'll probably get a much better sense of where NAV is now, but it's everyone's guesswork until then.
    Jan 6, 2015. 11:40 AM | Likes Like |Link to Comment
  • A Focused High Yield ETF: What Could Go Wrong? [View article]
    This article was addressed to the average private investor not a prop trader. The logic makes complete sense in that context - a rational, private investor, who doesn't stare at a screen all day trying to guess the direction of a security's move, does and should have a healthy fear of loss.
    Jan 6, 2015. 11:01 AM | Likes Like |Link to Comment
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