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  • Be Wary Of Prospect Capital [View article]
    Last year they made $46 million from management fees. From the Prospect Capital Management website, they list their whole team which is less than 60 people (including administration). So, that comes out to something less than $1 million/an employee. That seems a little high to me.
    Sep 13 10:20 AM | 1 Like Like |Link to Comment
  • Be Wary Of Prospect Capital [View article]
    Yes, it has done well over the last year, but that does not mean it will do well in the future. I was just trying to highlight the risks involved with investing in PSEC.
    Sep 13 10:14 AM | 1 Like Like |Link to Comment
  • Be Wary Of Prospect Capital [View article]
    From Prospect Capital Management's site, they list the whole team http://bit.ly/QekcKp. It is a team of less than 60 people. They earned over $46 million from management fees. About $1million/an employee seems a little high, but that is my opinion.

    Less than 5% a year over the last 8 years with the risks associated is good enough for some investors.
    Sep 13 10:11 AM | 1 Like Like |Link to Comment
  • Be Wary Of Prospect Capital [View article]
    True, market has been flat over the last 10 years. A lot of people would been happy with a 39% return over 8 years. If your goal is to get that kind of return, then it is possible in less riskier ways.
    Sep 13 10:02 AM | Likes Like |Link to Comment
  • Be Wary Of Prospect Capital [View article]
    Thanks for the comment MisterEd!

    Yes you are correct. There are periods of time where the NAV will increase. However, that could be due to a lot of different factors such as the company using more leverage, the business cycle, etc.. I think a 8 year look back is more informative than a 2 year look back. The NAV (along with the stock price) will probably increase over the next year as they are using more leverage, but to me it is not worth the risk.
    Sep 13 09:35 AM | Likes Like |Link to Comment
  • Be Wary Of Prospect Capital [View article]
    BigBlue,

    My thesis here was to highlight the risks involved. It was not to do any other type of research. But, yes those suggestions would be great articles to do for some of the people that are long on PSEC. I would be hesitant to invest in any BDC. Like I said, I should have mentioned that in the article.
    Sep 13 09:18 AM | Likes Like |Link to Comment
  • Be Wary Of Prospect Capital [View article]
    Thanks for the comment. I was trying to inform all investors what the risks of BDCs like Prospect are. Every investors risk/reward profile is different. For me, it is not worth investing in, but then again I would not short it either.
    Sep 13 08:58 AM | Likes Like |Link to Comment
  • Be Wary Of Prospect Capital [View article]
    BigBlue, thanks for the comment.

    It may be obvious to you, but not every investor. Which part is incomplete?
    Sep 13 08:53 AM | Likes Like |Link to Comment
  • Be Wary Of Prospect Capital [View article]
    Agreed. Next article will examine other ways to invest in Prospect.
    Sep 13 08:51 AM | Likes Like |Link to Comment
  • Be Wary Of Prospect Capital [View article]
    Not every individual investor is as informed as some of the more sophisticated investors on SeekingAlpha.

    Some investors look at the 10.5% dividend yield and want to invest. I was trying to prove two points:

    1. Investing in BDCs, like Prospect, is more riskier than investing in any general stock. They should understand how BDCs works.
    2. The company has not been returning 10%+ over the last 10 years.

    There will be investors, like you, who already know all of these things I mentioned in the article.
    Sep 13 08:50 AM | 1 Like Like |Link to Comment
  • Be Wary Of Prospect Capital [View article]
    Yes, they list the investment on this site and in their annual report, but it is very hard for individual investors to value those investments. There is no public financial information about the companies they are investing in.
    Sep 13 08:42 AM | Likes Like |Link to Comment
  • A Safe 7.7% Yield From AIG [View article]
    The best time to buy would have been when all the preferred and junior debts like AVF were trading at less than 20% the principal amount in 2009.

    I agree that this is not the best time to buy debt since interest rates are so low, but this is one of the best issues out there for investors looking for yield.
    Sep 13 08:39 AM | Likes Like |Link to Comment
  • Be Wary Of Prospect Capital [View article]
    I should I have said I am not a fan of any of the BDC companies based on their business model.I mentioned Prospect because that is the one I keep track of and analyze.

    To answer your 1 point. I did not say I would not buy Prospect at any price. If the price did go down to $8+ (below n.a.v.), I would possibly consider buying Prospect if I was the CEO and knew exactly what type of investments my portfolio held just like the CEO did. For everyday investors, it hard to know how safe the securities in their portfolio.
    Sep 13 07:12 AM | 1 Like Like |Link to Comment
  • Be Wary Of Prospect Capital [View article]
    I disagree. If the fed starts raising rates sooner than later, it will benefit Prospect. A lot of their portfolio is adjustable on libor. Higher rates will mean higher profits as long as the default rates stay low. Add to the fact that they have issued some debt at good rates that does not mature till 2022, higher rates will most likely help them. Declining rates will most likely hurt them especially now since they have levered up with debt.
    Sep 13 07:01 AM | 9 Likes Like |Link to Comment
  • A Safe 7.7% Yield From AIG [View article]
    Yes, I do believe AIG is a better investment as I wrote about in my previous article because it is significantly undervalued.

    However, AVF does offer a steady, safe return. Even if it is bought back within 18 months, you will still make a good return on your investment in this environment.
    Sep 12 11:08 PM | Likes Like |Link to Comment
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