BDC sector on sale

The selloff in BDCs is a buying opportunity, writes BDC reporter, noting the opportunity today to invest in a basket of BDCs (using BDCS as a proxy) at an 11% higher yield than just three months ago. The sector is yielding 43% more than high yield bonds (HYG) and nearly double floating rate loans (BKLN).

The higher yield, of course, reflects market concern distributions are set to fall (and BKCC and MCGC cut in Q1), but for the sector as a whole, distributions have been fairly stable over the last three years. Further, a number of players are under-leveraged or in growth phase, and occasionally have realized gains which are paid out as special distributions.

Keep this list around, says BDC Reporter, musing on those who may boost payouts over the next year: ACAS, ARCC, ACRE, ACSF, CPTA, FDUS, FSFR, FULL, HCAP, HTGC, MAIN, MVC, TAXI, PSEC, TCPC, TSLX


Comments (29)
  • njbother
    , contributor
    Comments (1120) | Send Message
    Long bkcc and loving it.
    23 May 2014, 08:12 AM Reply Like
  • privacy1015
    , contributor
    Comments (37) | Send Message
    Long MAIN, TAXI and PSEC and thrilled. PSEC in particular is compelling despite the SEC issues as it is on sale for less than BV and dividends are known through year end.
    23 May 2014, 08:20 AM Reply Like
  • mjtroll1
    , contributor
    Comments (2839) | Send Message
    the bdcs/jnk pair is 'rolling over' (year end 2013).. after a 3yr period of outperformance.. range was -10 to 0 (currently -4).. no sign of reversal ..wooul expect further bdcs weakness vs jnk
    23 May 2014, 08:32 AM Reply Like
  • thales23
    , contributor
    Comments (11) | Send Message
    I agree with you MJ the whole sector seems to correlate with the Junk Bond sector which appears to be overheated. It doesn't react exactly on a daily basis but for the past 5 years on a Monthly chart the price moves seem to be pretty similar. It looks like yield-wise it is a good buy now that good be even better if you wait a while.
    24 May 2014, 11:55 AM Reply Like
  • Brucejfern
    , contributor
    Comments (1740) | Send Message
    BKCC? Need to do some homework on that one. Dividend looks unsustainable. Better to go with best of breed and 2% less dividend income.
    23 May 2014, 08:39 AM Reply Like
  • VeroMike
    , contributor
    Comments (264) | Send Message
    Long ARCC, MAIN and TCPC.
    Owned ACAS 2012-2013, concerns made me sell after it went from $10 to $14 in early Feb 2013. Still in $14 range. Upside?
    23 May 2014, 08:46 AM Reply Like
  • murray555
    , contributor
    Comments (432) | Send Message
    Long ARCC, PSEC, MCC and BDCL. Sold MAIN and several others.
    23 May 2014, 09:19 AM Reply Like
  • Orthoeconomics
    , contributor
    Comments (193) | Send Message
    Here is the response I received from PSEC regarding some of the rumors about their SEC situation.


    The report is inaccurate in its assessment of the situation with the SEC.


    I suggest that you read pages 100-101 of our form 10-Q for the details of the disagreement with the SEC. It is important to point out that this will have very little effect on taxable income which is the metric on which dividends are being paid. Also, the consolidation of such holding companies by Prospect would actually decrease transparency to our shareholders.


    If you have any further questions, please do not hesitate to ask.


    Brian H. Oswald
    Managing Director - Chief Financial Officer
    Prospect Capital Corp.


    Phone: (212) 792-2259


    23 May 2014, 09:27 AM Reply Like
  • rdooley
    , contributor
    Comments (12) | Send Message
    Long PSEC but the SEC action erased nearly a year's earnings, but only if I sell the shares. I'll believe management for the time being: ""
    23 May 2014, 09:32 AM Reply Like
  • User 6830851
    , contributor
    Comments (275) | Send Message
    Long MAIN (Why did you sell, murray555?) and wish I had added at $29.


    Got in to PSEC (again) in the $9.50-ish area. We'll see how it goes.
    23 May 2014, 10:56 AM Reply Like
  • 8766921( Rajendra Agrawal)
    , contributor
    Comments (26) | Send Message
    I have followed the recent developments in PSEC with great interest. My own conclusion is that any downside risk associated with the SEC investigation, and possible adjustments of the financial statements, is already reflected in the recent drop of the share price. I have also concluded that the overall business of PSEC is on a solid ground and should be able to sustain the going forward dividends. I have therefore increased my position in this company by 30%.
    23 May 2014, 11:21 AM Reply Like
  • Dividends#1
    , contributor
    Comments (4330) | Send Message
    Hi Raj,


    I agree with you. I recently started a position and then built it up to a full position on the drop. My cost basis is $10.26 including dividends. I am feeling good about this investment. Did you read Scott Kennedy's articles on PSEC? If not, they are a must read for all PSEC shareholders!!!
    23 May 2014, 12:14 PM Reply Like
  • arthur_bishop1972
    , contributor
    Comments (4446) | Send Message
    Why do so many here feel compelled to post their BDC holdings??? The article doesnt instruct readers to post their holdings. Maybe post your thoughts on which is the best deal and why??
    23 May 2014, 12:14 PM Reply Like
  • Dennis Tikkanen
    , contributor
    Comments (156) | Send Message
    There are some of us who are curious about what others are buying or holding.


    I own a small stake in ARCC. Deferring on buying more until the Russell delisting passes.
    23 May 2014, 11:52 PM Reply Like
  • Dividends#1
    , contributor
    Comments (4330) | Send Message


    You have a degree in psychology, you should therefore have an idea why we post our holdings.


    I post my holdings because it makes me accountable to myself and the SA community. It stops me from being a trader and makes me an investor. I am not saying everyone should do so, or it will have the same effect on others, it just works that way for me.


    I have posted my holdings and the % of my portfolio since I became a member and I have had excellent success in doing so.


    My entire Portfolio:


    AGNC = 50%
    MO = 27%
    PSEC = 12%
    KMR = 8%
    MTGE =3%
    23 May 2014, 12:28 PM Reply Like
  • arthur_bishop1972
    , contributor
    Comments (4446) | Send Message
    Yes, I certainly understand why posters list their holdings, D#1. I occ post mine (and some of my clients) as well. It just seems like a bell rings (article is posted) and we see some only post their holdings and nothing else. How does that help the rest of us???


    And don't even get me started on those posters whose first post is their life story in a paragraph. Why the heck do they do that???


    If you go to a dance (or a bar, if you prefer), you don't just stand there with your credentials (wallet, degree, past relationships, income level, etc.) hanging out and expect people to come to you, do you?? You mingle, talk and ask questions, discuss news of the day, etc. How does simply posting your holdings help the discussion at hand??


    Imo, it doesn't. That's all I'm saying.
    26 May 2014, 04:40 AM Reply Like
  • Dividends#1
    , contributor
    Comments (4330) | Send Message
    Hi Arthur,


    I see your point. I try to share my thoughts and philosophy concerning investing as often as I can. Sometimes I even share information which other SA members tell me has directly helped them. They have even learned something new.


    I have learned more from this site ( certain commenter's and authors) then any other source in over 22 years in the market. I have also read some excellent books and gained my philosophy from Ken Fisher. If you have not read Ken Fisher's " The Only Three Questions That Count", I highly recommend doing so as soon as possible, it is a must read in my opinion. Especially for someone in the field of psychology. I minored in Psychology.


    Let me know if you have read it.


    He has several other excellent books. I use his philosophy, I do not buy his stock recommendations ( he also writes for Forbes and make picks every year, I believe) or use his services. I like to manage my own accounts. I do enjoy his FREE quarterly market research booklets. They used to call me and try to solicit me to be a customer, I always turned them down. I have not seen his latest research, but I might google him and get my hands on an e-mailed version.
    26 May 2014, 05:29 PM Reply Like
  • arthur_bishop1972
    , contributor
    Comments (4446) | Send Message
    I have not read it D#1, but I will p/u a copy-thank you for the head's up.
    27 May 2014, 10:59 PM Reply Like
  • dundey
    , contributor
    Comments (1041) | Send Message
    Well said Div.


    I would also add TICC to this list. Am long TICC and MAIN.
    23 May 2014, 12:51 PM Reply Like
  • damie225
    , contributor
    Comments (23) | Send Message
    Long PSEC, MAIN and got greedy this past week :)
    23 May 2014, 01:11 PM Reply Like
  • lefty139
    , contributor
    Comments (7) | Send Message
    How about AINV ? Any comments.
    23 May 2014, 05:59 PM Reply Like
  • Contrarian Research
    , contributor
    Comments (178) | Send Message
    PSEC is still a bargain. Buy all you can.
    23 May 2014, 06:24 PM Reply Like
  • Mpac1
    , contributor
    Comments (121) | Send Message
    For me,the best thing is I continue to add shares via DRIP at lower prices....
    23 May 2014, 06:31 PM Reply Like
  • smurf
    , contributor
    Comments (6369) | Send Message
    Long PSEC, but will sell if it struggles upwards. These SEC things are never good, tend to drag on, and affect the stock negatively. I went through this with HCBK and held on due to blind faith which was unrewarded, to say the least.


    Long MAIN, ARCC and will probably use PSEC proceeds to increase those positions.


    24 May 2014, 11:08 AM Reply Like
  • KeithRichards
    , contributor
    Comments (157) | Send Message
    Long PSEC, and also own some $10 NOV PSEC Puts as insurance in these uncertain times. I cashed out my protective AUG puts when PSEC went to $9.20 for a very nice gain and reinvested half of it into the NOV puts. This is a great method for those of you who are more risk averse and plan on keeping PSEC as long as the business keeps covering it's dividend.
    24 May 2014, 08:53 PM Reply Like
  • jpz11
    , contributor
    Comments (258) | Send Message
    Just because PSEC has declared dividends through the end of the year can they not rescind them due to financial hardship?
    25 May 2014, 09:02 AM Reply Like
  • Broadcaster 1
    , contributor
    Comments (724) | Send Message
    you are correct, PSEC is on sale, but, it's moving up, gained a total of 20 cents on the last 2 trading days.
    25 May 2014, 05:50 PM Reply Like
  • Broadcaster 1
    , contributor
    Comments (724) | Send Message
    You are correct, PSEC is on sale, but for a limited time. PSEC gained 20 cents in the last 2 trading days.
    25 May 2014, 05:59 PM Reply Like
  • Brucejfern
    , contributor
    Comments (1740) | Send Message
    The thing about PSEC is whether suspension of their ATM program creates problems maintaining their dividend. PSEC's cost of capital is so high it is hard to imagine they can sustain their dividend now. I was systematically selling down my position and sold it all before this recent fall.


    I am scaling back in to BDCs with fewer reasons for me to lose sleep at night.
    31 May 2014, 10:23 AM Reply Like
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