- The market has more than adequately priced in expectations for further credit issues, says the team of Troy Ward and Greg Mason, noting consensus estimates have already been adjusted to reflect limited fees and slower portfolio churn. WIth an average yield of 10% and very low valuations, a 15% return in 2016 could be just a chip shot away.
- As for rising interest rates, perceptions that this is bad for yield investments has also been fully priced in. And once rates rise and investors see earnings not being materially affected, there could be a push to buy.
- Another possible catalyst: The activist push for lower fees.
- Among stocks on their buy list: Hercules Technology (NASDAQ:HTGC), Alcentra Capital (NASDAQ:ABDC) for improving fundamentals, and American Capital (NASDAQ:ACAS), Fifth Street Finance (FSC), and Medley Capital (NYSE:MCC) thanks to activist involvement.
- ETFs: BDCL, BDCS, BIZD, FGB