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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 6.61   0.0 -0.51 0.84 12.65
MONROE CAPITAL 11.19   19.3 0.58 1.40 12.41
APOLLO INVESTMENT 16.34   16.2 1.01 1.80 11.06
KOHLBERG CAPITAL 3.75   0.0 -0.25 0.40 11.05
PENNANTPARK INVESTMENT 6.55   14.6 0.45 0.72 10.93
TCP CAPITAL 14.06   19.5 0.72 1.44 10.18
CAPITALA FINANCE 9.83   0.0 -1.06 1.00 10.13
OAKTREE SPECIALTY LENDING 4.90   0.0 -1.39 0.50 10.02
HERCULES TECH GROWTH CAP 12.98   9.1 1.42 1.28 9.85
PENNANTPARK FLOATING RATE CAPITAL 11.64   29.1 0.40 1.14 9.80
FIDUS INVESTMENT 16.18   8.6 1.87 1.56 9.68
GOLDMAN SACHS BDC 19.80   21.3 0.93 1.80 9.08
ARES CAPITAL 18.16   9.3 1.95 1.60 8.82
GLADSTONE CAPITAL 9.39   31.3 0.30 0.84 8.82
SOLAR SENIOR CAPITAL 16.37   16.9 0.97 1.41 8.63
MEDLEY CAPITAL 2.44   0.0 -1.55 0.20 8.06
GLADSTONE INVESTMENT 11.16   4.5 2.48 0.82 7.24
GOLUB CAPITAL BDC 17.81   14.6 1.22 1.28 7.12
MAIN STREET CAPITAL 41.95   14.5 2.89 2.46 5.81

THL CREDIT - TCRD
THL CREDIT - TCRD  


Older articles featuring Thl Credit (TCRD):
Assessing Risk: Retirement Portfolio Using BDCs Yielding 10%+
Building A Retirement Portfolio With BDCs Currently Yielding 10.6%
10% Yielding New Mountain Finance Receives Fitch Rating
Dividend Increases For The High-Yield BDC Sector, Part 6: Gladstone Investment
Dividends By The Numbers For March 2019 And 2019-Q1
Apollo Investment: 12% Yield Supported By Improving Portfolio Quality
69 10%+ Dividend Yield WallStars Portend Ides Of March Fortunes
Dividend Increases For The High-Yield BDC Sector, Part 5: BlackRock TCP Capital
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

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