More room to run for BDCs - KBW

|By:, SA News Editor

Despite a run of more than 30% over the past year, the team at KBW says BDCs continue to be very reasonably priced and are set to offer relatively strong returns.

The big move higher, they note, came from extremely low valuations amid the crash in the energy sector. BDCs today still can be bought for just 10.6x earnings - only slightly higher than the historical average of 10.2x, and less expensive than other income sectors like MLPs, banks, and equity REITs.

Their favorites are Hercules Capital (HTGC -1.6%) and Ares Capital (ARCC -1.2%).

As for today, BDCs are selling off alongside the broader markets as the price of oil touches a new low in its current bear run.

Prospect Capital (PSEC -2.1%), FS Investment (FSIC -1.5%), Main Street Capital (MAIN -1.3%), Apollo Investment (AINV -1.9%), TICC Capital (TICC -1.7%), PennantPark Investment (PNNT -1.2%)

ETFs: BDCL, BDCS, BIZD, FGB, LBDC