Hercules Capital: We Are Buying Investment Grade Bonds Yielding 7.5%

Summary

  • Hercules Capital is a leading BDC lending to venture-backed companies, with a $3 billion loan portfolio.
  • The company is investment grade rated; Baa3 by Moody's.
  • As a BDC, asset coverage of 150% is required providing strong protection for bondholders; actual coverage is 186%.
  • Hercules performance has been excellent with effectively zero non-accruals on its loan book today.
  • The 7.5% yield-to-maturity offers an excellent risk/reward.

A businessman controlling a futuristic display with a Capital on it.

Duncan_Andison

Introduction

Last month we wrote an article how our investment firm has currently shifted away from most preferred stock investments since the current risk/reward dynamics, in our view, strongly favors bonds. This is especially true as it relates to smaller and mid-cap

This article was written by

Downtown Investment Advisory (DIA)* is a New York-based investment adviser registered with the U.S. Securities and Exchange Commission (SEC). DIA provides customized investment advisory services to individuals, charitable institutions and retirement plans. DIA currently has over $125 million of assets under management. DIA specializes in creating custom fixed income portfolios with a core of individually selected bonds, preferred stock, exchange traded debt and other income focused investments. Please check out the firm website at www.downtownllc.com for additional information.DIA's Seeking Alpha page has over 2,000 followers. These followers have not been solicited by DIA, and the presence of these followers should not be considered testimonials or advertisements for DIA's investment management services.Important disclaimer language for all articles published on Seeking Alpha:All articles and comments published by DIA are intended as an information source for investors capable of making their own investment decisions. However, this information is not intended to be used as the sole basis of any investment decisions, nor should it be construed as advice designed to meet the investment needs of any particular investor. It remains the reader’s exclusive responsibility to review and evaluate the content of the articles and to determine whether to accept or reject the content. DIA expresses no opinion as to whether any of the content of any article or recommendation is appropriate for a reader’s investment portfolio, strategy, financial situation, or investment objective. Readers do not receive investment advisory, investment supervisory or investment management services, nor the initial or ongoing review or monitoring of the reader’s individual investment portfolio or individual particular needs. Therefore, no reader should assume that any articles or comments published on Seeking Alpha is a substitute for individual personalized advice from an investment professional of the reader’s choosing. Rather, these articles and comments are designed solely to provide readers with a method to evaluate certain investment-related information.The information upon which all articles and comments are based on is obtained from sources believed to be reliable, but has not been independently verified. Therefore, DIA cannot guarantee its accuracy. Information regarding a company or security may be obsolete by the time it is published on Seeking Alpha and investors must therefore independently verify updated information regarding a company or investment. Any opinions or estimates constitute the author's best judgment as of the date of publication, and are subject to change without notice. Despite best efforts to provide quality investment information to our readers, DIA does not accept any liability or responsibility for any loss resulting from investment decisions based on information in any article or comment. DIA does not get paid or receive compensation of any kind by any company or any third party for discussing a particular company or investment in any article.* Downtown Investment Advisory is the "doing business as" name of Maytal Asset Management LLC. A copy of DIA's Form ADV Parts 1 and 2A disclosure documents are available via the Investment Advisor Disclosure Website (www.adviserinfo.sec.gov/IAPD).

Analyst’s Disclosure:I/we have a beneficial long position in the shares of HCXY 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 (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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