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Time To Sell Solar Senior Capital


  • I recently sold my position in SUNS for the reasons discussed in this article.
  • The company will announce results in 5 weeks with likely a 1.7% decline in its book value.
  • SUNS is still a good company and I will likely repurchase at lower prices.
  • This idea was discussed in more depth with members of my private investing community, Sustainable Dividends. Get started today »


I rarely issue 'Sell' recommendations for business development companies ("BDCs") as investors can sit back and collect dividends while waiting out market pullbacks and temporary credit issues.

However, on September 27, 2019, I issued a 'Sell' for Solar Senior Capital (NASDAQ:SUNS) to subscribers of Sustainable Dividends for the reasons discussed in this article. SUNS is thinly traded with around 40,000 shares per day prior to my announced sale:

What Is A BDC?

Business Development Companies ("BDCs") were created by Congress in 1980 to give investors an opportunity to invest in private small and mid-sized U.S. companies typically overlooked by banks. Most BDCs are publicly traded with a highly transparent structure subject to oversight by the SEC, states and other regulators, providing investors with higher than average dividend yields (most between 7% and 13% annually) by avoiding taxation at the corporate level. This allows them to pass along ordinary income and capital gains directly to the shareholder. SUNS is typically among the lower yield BDCs due to having lower-yielding and safer investments but still has a much higher yield and overall returns than the iShares iBoxx $ High Yield Corporate Bond ETF (HYG) and the SPDR Barclays Capital High Yield Bond ETF (JNK) as discussed in "Search For Yield: Bond Funds Vs. BDCs."

It should be noted that TPVG is usually higher yield but currently aggressively priced in my opinion.

Upcoming Volatility And General Market Pullback?

As mentioned in "Balancing Your Portfolio With BDC Baby Bonds," I have been making select purchases of BDC baby bonds and preferred shares as I believe there will likely be a general market and/or BDC sector pullback in Q4 2019 for multiple reasons including seasonal as well as taking profits (selling and locking in gains). The average BDC was down around 3.5% during the first 3

The information in this article was previously made available to subscribers of Sustainable Dividends, along with:

  • SUNS target prices and buying points
  • SUNS dividend coverage expectations and worst-case scenarios
  • SUNS rankings and risk profile
  • Real-time changes to my personal BDC positions

This article was written by

BDC Buzz profile picture

BDC Buzz is a professional money manager with over a decade of experience generating institutional-quality research.

He is the leader of the investing group Sustainable Dividends where he provides investors live portfolios with real-time updates, weekly BDC sector updates, company projection reports, baby bond reports, and live chat access to answer questions. Learn more.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (32)

theheckwithtech profile picture
So how does everybody feel about this one today?
hmmm..look where it is trading now.....sell huh?
BDC Buzz profile picture
Not sure I understand your comment. They have not reported results yet so the information in this article is not reflected in the current stock price. There's still another 3 weeks.
and now?
Steve Rasher profile picture
@Kidzip1 Buzz is only human. He provides his best intuition based upon the facts. I did not follow his advice to sell, as I like the safety of $SUNS and expected somewhat of an increase in interest rates, which would benefit $SUNS and other BDCs. I will continue to hold, as I believe it might be time for BDCs to start an upward movement with other financials. Steve
""Approximately, 98% of our portfolio consisted of senior secured loans of which approximately 55% are in first lien cash flow loans and approximately 43% are in first lien asset-based loans "".

How important is the difference between these two types of first lien loans? (cash flow and asset-based)?

And...."Including the $40 million factoring portfolio that we acquired with Summit Financial, the portfolio now consists of 151 issuers with an average funded loan size of just over $1 million. ""

How can any BDC try to keep track of, and follow the success and failure of 151 issuers? How many issuers does the average BDC have?
tjhoppe profile picture
@Dave McKay1 - How do they keep track of 151 issues? They receive daily, weekly and monthly "flash reports"and "metrics dashboards" along with regular personal contact with management personnel. Did you ever work for a company that was owned by private equity? Similar intense reporting requirements.
BartAtTheRanch profile picture
Thanks @BDC Buzz

I cannot help but wonder how similar the actual management of SUNS is to SLRC? Generally both, but especially SLRC, have been well-regarded (I note you may buy back into SUNS). Are the same people making the actual investment decisions at both companies?

I can see that the comparison to markdowns by the other BDCs you cite (and they also a well regarded bunch) suggests a likely markdown at SUNS.

Overall, I really appreciate your methods.

RoseNose profile picture
Thank you @BDC Buzz !
You always offer some wonderful information and charts. I do not own SUNS, but knowing you would buy back in is a reason to keep it on a watch list. I find your sage advise tucked in the articles about other BDCs and the comments too! So much fun to read and learn.
Still long ARCC, TCPC (added some on the recent dip), PFLT, CGBD and hold a tiny amount of FSK. I will wait for those Oct-Nov dates to do anything more or one of your articles that reveal so much vision. Best, Rose :))
thebellsareringing profile picture
I sold SUNS a few days ago.
I sold when it hit 17 so didn’t do as well as you did so kudos. Hoping we have a December like last year. Thanks for the article. Definitely more detail than my back of the envelope reason to sell.
I sold my position early last week as well. Expecting to come in lower
I would think that the writedown of ATS is due to strong competition from Zoom Video. Ticker is ZM. All reviews I have read is that Zoom is best of breed
BDC Buzz profile picture
Yes, likely continued writedowns for ATS.
freestar profile picture
Is suns associated with SLRC? Does this recommendation to sell also apply to SLRC.
BDC Buzz profile picture
They have the same external manager but this article does not include SLRC.
freestar profile picture
Thanks BDC Buzz!
Thanks for the article. Never had any SUNS, but the only BDC I own now is TPVG so appreciate any info you have. I realize TPVG seems a bit overpriced now so took some profits to reduce cost basis. Still looking to buyback lower on any significant pullbacks or enjoy more profits on what I have left if it continues to move up, but like Icarus and SUNS may be getting close to the sun though lol.
BDC Buzz profile picture
Yes, TPVG has had quite the run. I would sell if I had a larger position, to reinvest in some of the others trading near recent lows.
cgbd still pretty cherap
BDC Buzz profile picture
Yes, CGBD dipped again. As discussed in previous articles, I'm expecting continued weakness for the stock until a couple positively reported quarters.
High Yield Cash Flow profile picture
Thanks Buzz, I backed out of SUNS completely and placed the funds into other BDCs. Thanks for bringing this concern to our attention. Monday should be interesting with SUNS.
BDC Buzz profile picture
Yes, given the low volume, I would expect some volatility in the morning.
tjhoppe profile picture
So that is what caused the opening gap down on 9/27, which was promptly reversed with a new 52 week high on 10/1. Represents 2% of my portfolio and solidly in the green. With no dividend reduction imminent, I'm going to hold.
BDC Buzz profile picture
I will wait for the company to report results and then buy back in, likely at much lower prices as it's currently priced on the high side.
McBifferton profile picture
Why not sell after the dividend payment in November?
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