American Capital: 50% Upside With Downside Protection
- American Capital (ACAS) is a BDC which is generating strong cash flow but not paying dividends due to a large tax loss carry forward.
- Its current net asset value (NAV) is $20.12 so that it is trading at a discount of 31%.
- ACAS is planning to implement a restructuring which should unlock its true value with the resulting equities trading at or above current NAV.
- If, for some reason, the restructuring does not take place, ACAS will almost certainly resume share repurchases which will drive the price up to the $16-17 level.
- NAV will tend to increase at roughly 10% per year while this scenario is playing out - providing further downside protection.