Investors may want to take profits in BDCs, says Wells Fargo, downgrading the sector to Hold....

Investors may want to take profits in BDCs, says Wells Fargo, downgrading the sector to Hold. New investment yields are near historic lows despite higher leverage multiples and a spike in covenant-lite deals, says Wells, a risky combination. Individual downgrades: AINV, PSEC, BKCC, TICC, HRZN, PNNT, TCRD, MCC. A few upgrades make the mix: HTGG, GBDC, ARCC, NMFC.

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Comments (14)
  • blhoke
    , contributor
    Comments (38) | Send Message
    Well, three cheers for Wells Fargo! Now my PSEC may drop a bit and offer another buying opportunity.... Thank You Wells Fargo!
    26 Mar 2013, 11:09 AM Reply Like
  • blhoke
    , contributor
    Comments (38) | Send Message
    Thank You Wells Fargo. PSEC will probably sell off a bit and provide another wonder buying opportunity!
    26 Mar 2013, 11:12 AM Reply Like
  • Caraita
    , contributor
    Comments (41) | Send Message
    This news puzzling that the group got downdraged today. I talked to a business development company a while back maybe 6 months. And they told me wells fargo was giving them the money to do the lending. The rates were so high that i did not use them . Maybe small business is just saying no to the loans now???
    26 Mar 2013, 11:24 AM Reply Like
  • harnettdj
    , contributor
    Comments (130) | Send Message
    Mostly that was a down grade to HOLD NOT SELL!! yes they'll go down for awhile but ?? Then follow the market ?? The truth is in the dividends ... Watch for cuts or no increases?
    long PSEC and TCRD
    26 Mar 2013, 11:29 AM Reply Like
  • mrmedusa
    , contributor
    Comments (577) | Send Message
    I added to my PSEC- every month 100 shares equals $11.00 dividend...and growing, too. Have held for a few months... not upset with anything re PSEC. WF upgraded my HTGC...hope it isn't the kiss of death.
    26 Mar 2013, 12:24 PM Reply Like
  • VeroMike
    , contributor
    Comments (263) | Send Message
    Ex dividend 11 cents today probably the 10 cent drop.
    Long PSEC, ARCC, MITT and TWO.
    Love those dividends and some capital gains.
    WFC probably looking to buy more, trying to drive prices down.
    They give you <1% on a CD and invest it in PSEC themselves.
    26 Mar 2013, 12:24 PM Reply Like
  • Chancer
    , contributor
    Comments (4191) | Send Message
    Maybe Wells Fargo is shorting BDC's?
    26 Mar 2013, 01:23 PM Reply Like
  • AlaskanGoldMiner
    , contributor
    Comments (109) | Send Message
    Dear Wells Fargo: I may want to take profits in PSEC? I already take profits in PSEC.....every month. They were even kind enough to increase my dividend by 10% in February. Long PSEC and buying the dips.
    26 Mar 2013, 01:24 PM Reply Like
  • speculative
    , contributor
    Comments (1640) | Send Message
    WF can downgrade all they want. I just loaded up on some more AINV thanks to WF driving it down. I wanted to add more some time back but was unable to do so. AINV was already my biggest holding and with the great sale WF has forced on investors seeking bargains, who can pass it up. AINV fluctuates within $2.50 with is low risk while paying 9.64% dividend at the current price. I'm in these for the dividend income and I'm sure WF is too but needed a far better entry point in the BDC's. Keep in mind the millions of dollars the Good old boys (institutional investors) play with and why would they buy at a higher price when they can influence a better entry point and then later on, they change their sentiment and upgrade to keep the retail investors away. On 2/2/2012, AINV was initiated with a BUY by UBS with a $10 price target (link below). In addition, Motley Fool writer George Schneider covered AINV in an article titled Retirement Mantra: Diversify with Dividend Growth and Reinvestment explaining the assumption of investing 20K in AINV and how it would grow at 9.2% to $21,840 dividend reinvested. He also mentioned that with the economy gaining momentum, revenues and earnings should continue to build and develop from here and result in higher dividends going forward. Folks, read between the lines and as someone above mentioned, the is not a sell signal but a hold and for those seeking dividend income, buy your way to retirement.


    26 Mar 2013, 01:29 PM Reply Like
  • TwistTie
    , contributor
    Comments (2429) | Send Message
    There is nothing wrong with holding BDCs or advising people to do so.


    In moderation of course.
    26 Mar 2013, 02:41 PM Reply Like
  • GANDALF1953
    , contributor
    Comments (3) | Send Message
    Can't understand the downgrade on PSEC...all proponents remain
    the same. I see great entry buying opportunity.
    Look at ARR, so they decreased the dividend. It is still a strong buy.
    26 Mar 2013, 05:36 PM Reply Like
  • speculative
    , contributor
    Comments (1640) | Send Message
    Exactly, and the same goes for AINV. If any of these needed a downgrade it should have been CIM. Now don't get me wrong, I hold a huge position in CIM, at least for me it's huge, and not only did they gain today, they are opening higher tomorrow too. As I mentioned before, this is for the benefit of WF and those who read between their lines can benefit just as well. While WF is at it, they can go ahead and downgrade a few more that I need to buy at lower prices to get in on the dividend(s) for cheap. Another article mentions how well WF did with their BDC portfolio to the tune of gaining 33% and this year so far they are up but a measly 7%. How else would they beat their previous performance. Downgrade now, buy at the bottom, then upgrade and enjoy the dividends for their shareholders while increasing their portfolio gain. Well, I'm using their downgrade and doing the same they are, buying now before the anticipated upgrade(s). This is a no brainer and I have seen it happen plenty of times before. Maybe this helps explain the downgrade as AINV was recently upgrade and reiterated a buy by UBS this past February. Now who do you believe? I'm sticking with UBS.
    26 Mar 2013, 08:25 PM Reply Like
  • GlowWorm
    , contributor
    Comments (25) | Send Message
    Short WF,
    Long PSEC!


    26 Mar 2013, 06:52 PM Reply Like
  • AlbionWood
    , contributor
    Comments (940) | Send Message
    HRZN getting a nice bump today... guess that downgrade didn't have much effect. Like AlaskanGoldMiner, I am taking profits in these every month (PSEC, FSC, HRZN) or quarter (HTGC).
    27 Mar 2013, 02:21 PM Reply Like
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