PennantPark Floating Rate Capital: One Of My Favorite BDCs, But Market Liquidity Risks Rising

Harrison Schwartz
16.38K Followers

Summary

  • Many investors are seeking high-yielding stocks and bonds, leading to the popularity of ultra-high yield investments, which can have hidden risks.
  • Business development companies are attractive due to high yields and often below 1X beta levels.
  • PennantPark Floating Rate Capital, a popular BDC, has had solid returns but experienced a significant loss in 2020, highlighting the risks involved.
  • PFLT's leverage today is lower than in 2020, while interest rates are higher, potentially improving its risk-reward profile compared to then.
  • PFLT is still trading at a slight premium to its tangible book value, so it may be best to wait for a correction before buying, particularly given broader stock market risks.
Signature, contract and deal with hands of business people for partnership, meeting and onboarding recruitment. Paperwork, consulting and application with closeup of employees in office for documents

Kobus Louw

Today, many investors are looking for very high-yielding stocks and bonds. Ultra-high-yield investments are prevalent today due to the growing number of retired individual investors. Over the past decade, there has been a solid trend toward high stock ownership among

This article was written by

16.38K Followers
Harrison is a financial analyst who has been writing on Seeking Alpha since 2018 and has closely followed the market for over a decade. He has professional experience in the private equity, real estate, and economic research industry. Harrison also has an academic background in financial econometrics, economic forecasting, and global monetary economics.

Analyst’s Disclosure:I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such 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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