Ares: 40 Big-Yield BDCs, Silicon Valley Bank Fallout

Summary

  • Ares Capital is an attractive 11.2% yield BDC but currently faces market-cycle risks, including fallout from the recent Silicon Valley Bank failure.
  • We review Ares (including its industry exposures and risks) and then compare it to 40 other BDCs, including four with particularly heavy venture-capital industry exposure: Hercules, TriplePoint, Horizon, and Trinity.
  • We conclude with our strong opinion about investing in BDCs right now, especially Ares Capital and VC-focused BDCs in particular.
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Blue Harbinger Research, Big Dividends PLUS

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Business Development Companies ("BDCs") are like banks, only riskier. And some BDCs are heavily concentrated in the venture capital ("VC") space, just like Silicon Valley Bank (SIVB) that was recently taken over

However, as long-term investors, we greatly prefer Ares, within the constructs of a prudently-diversified portfolio, such as our all-new "High Income NOW" portfolio (which includes Ares, plus two additional big-yield BDCs, as well as our Top 27 Big-Yield CEFs, REITs, BDCs, dividend-growth stocks and more).

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This article was written by

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Mark D. Hines | Private Investor. Former allocator and buyside PM. Now building Blue Harbinger Research (top ideas plus the “High Income NOW” and “Disciplined Growth” portfolios) and Herrick Lake Investments (helping you make informed decisions). University of Chicago Booth MBA, BS in Finance from the University of Illinois at Urbana-Champaign.

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Analyst’s Disclosure:I/we have a beneficial long position in the shares of ARCC either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. 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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