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Strong Buy With 12% Yield With 30%+ Return Potential: TCG BDC

Published Wed, 13 Mar 2019 11:59:43 -0400 on Seeking Alpha

CGBD Article Follow-Up
In December/January, I purchased additional shares of multiple "oversold" higher-quality business development companies ("BDCs") with risk-averse balance sheets prepared for a potential economic slowdown, including TCG BDC Inc. (CGBD) as discussed in "I Just Bought More TCG BDC, Which Is About To Rally With A Safe 13% Yield".
The previous article included the following CGBD chart and mentioned:
CGBD has declined more than the average BDC, and I purchased shares yesterday at $12.34 for the reasons discussed in this article.

Source: Yahoo Finance
In December 2018, the BDC sector was oversold (along with other higher-yielding assets) due to wider yield spreads as discussed in previous articles. BDC pricing is closely correlated to yield spreads including other non-investment grade debt and ‘BofA Merrill Lynch US Corporate B Index’ (Corp B). I typically make multiple purchases when Corp B effective yields rise. As shown in the chart below, Corp B yields have been falling back to previous levels driving higher BDC pricing this year:

Source: FRED
Additionally, CGBD's stock price has been under technical pressure due to the semiannual release of pre-IPO shares (June and December) as discussed at the end of this article.
As of the writing of this article, CGBD's stock was trading at $14.93 and 21% higher than my most recent purchase, easily outperforming most BDCs and S&P 500:

Source: Yahoo Finance
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Stock name Last trade   P/E Earnings/Share Dividend/Share Dividend yield
THL CREDIT 6.71   0.0 -0.33 0.84 16.07
CAPITALA FINANCE 7.94   0.0 -1.04 1.00 12.77
APOLLO INVESTMENT 15.72   18.5 0.85 1.80 11.52
KOHLBERG CAPITAL 3.53   0.0 -0.25 0.40 11.14
MONROE CAPITAL 12.60   43.4 0.29 1.40 11.02
PENNANTPARK INVESTMENT 7.06   11.8 0.60 0.72 10.21
FIDUS INVESTMENT 15.52   7.7 2.02 1.56 10.14
HERCULES TECH GROWTH CAP 12.30   14.5 0.85 1.24 10.11
OAKTREE SPECIALTY LENDING 4.90   0.0 -1.39 0.50 10.02
TCP CAPITAL 14.26   18.5 0.77 1.44 10.02
GLADSTONE CAPITAL 9.21   28.8 0.32 0.84 9.24
ARES CAPITAL 17.17   8.5 2.02 1.60 8.96
GOLDMAN SACHS BDC 20.60   15.5 1.33 1.80 8.74
SOLAR SENIOR CAPITAL 17.10   20.1 0.85 1.41 8.26
GOLUB CAPITAL BDC 17.90   13.6 1.32 1.28 7.11
GLADSTONE INVESTMENT 11.84   3.8 3.09 0.82 6.96
MEDLEY CAPITAL 3.20   0.0 -1.63 0.20 6.21
MAIN STREET CAPITAL 38.44   13.7 2.81 2.40 6.17
PENNANTPARK FLOATING RATE CAPITAL 12.98   13.8 0.94 0.76 5.90

THL CREDIT - TCRD
THL CREDIT - TCRD  


Older articles featuring Thl Credit (TCRD):
Dividend Increases For The High-Yield BDC Sector, Part 4: Main Street Capital
March Magic 10%-Plus Yield Dividend WallStars Flaunt Gains, Yields And Prices
Dividend Increases For The High-Yield BDC Sector, Part 3: TPG Specialty Lending
Dividend Increases For The High-Yield BDC Sector: Part 2
69 February 10%+ Dividend Yield WallStars Have Heart
Shutdown Could Be A Win For These High-Yield Venture Debt Providers
101 End-O-December 10%+ Yield Dividend WallStars Toast Tremendous Target Gains And A Merger
I Just Bought More TCG BDC, Which Is About To Rally With A Safe 13% Yield
18 'Safer' Dividend 10%+Yield WallStars Shine On Mid-December
18 'Safer' Dividend 10%+ Yield WallStars Twinkle Pre-December

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