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Why I Sold This 11.1% Yielding BDC That Could Now Be A 'Buy'

Published Thu, 11 Oct 2018 08:35:20 -0400 on Seeking Alpha

Recent BDC Pricing Volatility Readers may have noticed the recent volatility in BDC pricing over the last two weeks. Please see "BDC Market Update: October 9, 2018", that discussed current yield spreads, sector oversold/overbought measures, and recently improved BDC fundamentals including higher portfolio yields, improved net interest margins, improvements in underlying general economic fundamentals including unemployment rate, labor force participation, consumer consumption and corporate earnings.
However, I am expecting temporarily lower BDC prices for the reasons discussed in the update including widening of rate spreads and general market volatility driving ‘flight to safety’. As you can see, the average BDC yield is currently trending higher:

Source: SEC Filings and BDC Buzz.com

As mentioned in "Upcoming BDC Dividend Cuts For Q3 2017", I previously sold shares in FS Investment Corp (FSIC) due to the predicted dividend reduction and my previous public FSIC article "10% Yield And 18% Discount To Book: Priced For Upcoming Credit Issues?", focused on the growing amount of investments with a rating of ‘3’:

Immediately after FSIC reported Q2 2018 results on August 9, 2018, I sold my remaining shares (before the recent decline shown below) for the reasons discussed in this article.

Obviously, timing is important when investing, but especially with business development companies... Read more

Stock name Last trade   P/E Earnings/Share Dividend/Share Dividend yield
GARRISON CAPITAL 6.94   0.0 -0.08 0.92 13.18
THL CREDIT 6.59   0.0 -0.51 0.84 12.52
BLACKROCK KELSO CAPITAL 6.26   69.6 0.09 0.72 11.61
APOLLO INVESTMENT 16.29   16.1 1.01 1.80 11.11
KOHLBERG CAPITAL 3.75   0.0 -0.25 0.40 11.05
PROSPECT CAPITAL 6.33   10.6 0.60 0.72 10.96
CAPITALA FINANCE 9.30   0.0 -1.06 1.00 10.91
HORIZON TECHNOLOGY FINANCE 11.76   10.1 1.16 1.20 10.27
OAKTREE SPECIALTY LENDING 4.90   0.0 -1.39 0.50 10.02
TCP CAPITAL 14.43   20.0 0.72 1.44 9.80
GOLDMAN SACHS BDC 19.83   21.3 0.93 1.80 9.12
ALCENTRA CAPITAL 8.41   28.0 0.30 0.72 8.90
MEDLEY CAPITAL 2.50   0.0 -1.55 0.20 7.87
OAKTREE STRATEGIC INCOME 8.35   23.9 0.35 0.62 7.35
GOLUB CAPITAL BDC 17.82   14.6 1.22 1.28 7.26

GARRISON CAPITAL - GARS
GARRISON CAPITAL - GARS  


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