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Main Street Capital (MAIN -4.2%) continues for a 2nd day to bear the brunt of the selling in the...

Main Street Capital (MAIN -4.2%) continues for a 2nd day to bear the brunt of the selling in the BDC sector (BDCS -0.7%). The company's just-published investor day presentation is typical conference stuff - showing how the company is different (and superior) to its sector brethren, explaining the opportunities in lower and middle-market lending, and including several case studies. Also notably lower: MCG Capital (MCGC -1.6%), Prospect (PSEC -1.3%), and Hercules (HTGC -1%).
Comments (16)
  • Charles12345
    , contributor
    Comments (132) | Send Message
     
    Why are these stocks falling so much?
    4 Jun 2013, 01:58 PM Reply Like
  • arthur_bishop1972
    , contributor
    Comments (2693) | Send Message
     
    Interest rates thought to be rising soon...will make it harder for these co's to borrow, i.e. make the $ they have been making up to this point.

     

    Looks overdone to me...but we shall see.
    4 Jun 2013, 02:16 PM Reply Like
  • C. Whitehead
    , contributor
    Comment (1) | Send Message
     
    Fears of the Fed reducing QE *should push the value of their booked assets and notes down, which will reduce the premium paid of Price to Book. If interest rates rise, their current holdings are less valuable on the open market compared to new assets / notes at current market rates. So if interest rates go up the premium over Price to Book should correct itself. I do not believe the market should react this way, as MAIN specifically, should be generating new loans, and their assets consist of Mezz debt and equity warrants which are higher than market interest rates.
    4 Jun 2013, 02:17 PM Reply Like
  • srisner
    , contributor
    Comments (73) | Send Message
     
    Just look at the 10 year rate ($TNX) which has risen from 1.63% to 2.2%. It may not sound like much, but that is 32% in just the month of May !

     

    http://bit.ly/ZLM8fI
    4 Jun 2013, 02:42 PM Reply Like
  • RoberHD05
    , contributor
    Comments (77) | Send Message
     
    I do not think that investors are causing this. Sure, the fact that the Fed threatened to reduce the artificial QE that we have all gotten used to may have a small impact. However, I am of the opinion that non-investors are driving this. Specifically the day traders and short sellers and unsolicited bloggers, emailers and others with no skin in the game are whipping up a frenzie of "the sky is falling!"
    4 Jun 2013, 02:47 PM Reply Like
  • Caden
    , contributor
    Comments (8) | Send Message
     
    I believe what you are saying is correct but I think the problem could be a little deeper than that. I am not sure of the quality of the loans that PSEC has on the books. It is my understanding is that the pay scale for the executives is tied to how much they lend out which could compromise quality, just my opinion.
    4 Jun 2013, 03:24 PM Reply Like
  • Be Here Now
    , contributor
    Comments (4917) | Send Message
     
    PSEC management fee is 2% of assets, including uninvested cash. This puts them at the high end for the group. Ideally you do not want to pay management a fee for sitting on cash, and you would like the fee to be less than 2%. Some of the BDCs that have less of your money going to management are:

     

    ARCC 1.5% cash excluded
    NMFC 1.8% cash excluded
    SUNS 1.0% cash excluded
    TCPC 1.5% cash excluded
    4 Jun 2013, 04:16 PM Reply Like
  • skyraider
    , contributor
    Comments (501) | Send Message
     
    Be Here Now,
    Is there an easy "one stop" site to get this information on managements compensation for BDC's MLP's and MReits?
    thanks,
    sky
    4 Jun 2013, 08:34 PM Reply Like
  • Be Here Now
    , contributor
    Comments (4917) | Send Message
     
    skyraider,

     

    There is if your broker is Wells Fargo Advisors.
    5 Jun 2013, 09:45 AM Reply Like
  • FrankEllis
    , contributor
    Comments (245) | Send Message
     
    I perceive you are right, but that is only one tiny piece of the puzzle. Look also at the inverse relationship of value of the principle debt instrument to change in interest rates. As interest rates increase 1%, the value of a bond decreases 10%.

     

    Step two, less seen, and being fought by those who want to hold onto interest sensitive bonds, REIT's, and BDC's, is the roll over of smart money into growth oriented stocks, out of dividend and interest sensitive instruments. Why? Not because of the Fed or increasing interest rates, but because the Major Stock Indexes have broken through their 13 year side way resistance ceilings. Following each historical side ways cycle for at least eighty years has been an equally extended bull market resulting in a ten fold increase in the stock indexes. Given the choice between the ten fold increase and the interest/dividends available in bonds and interest sensitive Trusts, the smart money gets in on the ground floor of the coming long term bull market.
    The lengths of the side ways markets vary, the latest being 13 years, others 16 years, and some 20 or more years. Yet, because the side ways stock prices reduce PE's, increase cash on hand, grow dividends and yield, and a multitude of other factors, the extended ten fold bull market expansion is inevitable. So is the correction at the other end of the extended bull market. So there are no all-weather investments. Knowing when to change is the key. When the S&P broke above its 13 year ceiling of 1550, it started the upward trend, money rolled over out of interest and dividend payers into growth stocks, and as the bull runs over the bears, the historically record high amount of cash on the sidelines will energize the bull. Eventually John Q Public will jump on board the train that is "always going to go up" because it has been going up for 16 years and they missed it. Then the smart money will roll back into safer interest oriented investments. At some point there will be no more money on the side lines, no more buyers, and a new ceiling will be established as resistance, the late comers holding on and hoping to break even if/when the price returns to what they paid. So goes the cycles. Side ways. Up. Side ways. Up.
    In 1950 the S&P was at 19. In 2013 it broke the thrice reached 1550, which in itself is an 81 fold increase. Bears battle the bulls, but each have their day, or their years of cycle. Don't fight the index. Don't go against the flow of money. When the index climbs above its 200Day SMA, buy. When the index drops below its 200 day SMA, sell. You may average eight transactions in fifteen years, and miss all the drama and excitement and babble of day trading and fear and ecstasy, but taking most of the ten fold increase during the bull, and several 100% increases during the bear, will keep the portfolio healthy. From where we stand, having broken the resistance at 1550, think ten fold at 15500, and watch for the person in the street telling you how the stock market will go up forever. Be contrary and do the opposite of what news and public is saying, and keep the eye on the index crossing the 200 day moving average. Long term is the distance between the crosses. Be on the right side, and take no thought of reasons for short term changes. It is always volatile within its channel until it crosses.
    4 Jun 2013, 08:15 PM Reply Like
  • skyraider
    , contributor
    Comments (501) | Send Message
     
    Frank,
    Looked at PSEC and its' 200 day moving average on TD ameritrade. When I chart the 200 day on a year to date scale it shows PSEC below the average starting in mid march but when I chart it on the 3 year chart it is above until early May. Fill me in.
    thanks,
    sky
    4 Jun 2013, 08:45 PM Reply Like
  • arthur_bishop1972
    , contributor
    Comments (2693) | Send Message
     
    << the train that is "always going to go up" because it has been going up for 16 years>>

     

    It has??? Perhaps you could elaborate. I'm hearing echoes of 2000 and 2008 in my head at the moment.
    5 Jun 2013, 02:35 AM Reply Like
  • Be Here Now
    , contributor
    Comments (4917) | Send Message
     
    skyraider,

     

    I use 3 different chart services and they all show PSEC falling below its 200 DMA in mid-March regardless of time scale.
    5 Jun 2013, 09:54 AM Reply Like
  • Ilioula
    , contributor
    Comments (37) | Send Message
     
    Rising rates will always cause fixed rate investments prices to react; not always consistent with logic. Rising rates should not effect BDCs costs of funds, as they primarily issue stock for capital. In theory rising rates should be a sign of health in the economy; no one believes that.
    My thesis has always been that this is like Japan after their capital market and real estate collapses...not the same but in rhyme. With 2 to 2 1/2% growth for years.
    4 Jun 2013, 10:00 PM Reply Like
  • Workinhard
    , contributor
    Comments (231) | Send Message
     
    MAIN was trading at a high premium to BV and a low dividend yield , it was due for a selloff.
    4 Jun 2013, 11:36 PM Reply Like
  • fgarms1954
    , contributor
    Comments (22) | Send Message
     
    Buying opportunity!
    5 Jun 2013, 03:16 AM Reply Like
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