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Hedging Your Bet With American Capital Strategies

Instead of buying ACAS, have a look at their European subsidiary, a mini-me version, European Capital (ECAS.L) quoted on the London Stock Exchange. www.ecas.com/
It was IPO'd by Citibank at EUR 10 last year and is currently priced at EUR 5.75. A price-to-book of less than 0.7 and a yield of 11 per cent leave plenty of safety margin for slip-ups in their portfolio, which in any event is not excessively exposed to the toxic covenant-lite LBOs which will hit a wall in the next few years. Plus, the very capable and driven ACAS COO, Ira Wagner, has nailed his colors to the mast of that particular ship, and ACAS is really motivated to support the ECAS share price for the reasons outlined above (SFAS 157) - they have even announced a share buy-back. (Disclosure: I am long ECAS with a base price of around EUR 5.45)