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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
MONROE CAPITAL 10.48   18.4 0.57 1.40 13.60
CAPITALA FINANCE 8.19   0.0 -3.13 1.00 12.46
THL CREDIT 6.96   0.0 -0.86 0.84 12.09
PENNANTPARK INVESTMENT 6.32   21.8 0.29 0.72 11.32
KOHLBERG CAPITAL 3.75   0.0 -0.25 0.40 11.05
APOLLO INVESTMENT 16.78   14.2 1.18 1.80 10.73
FIDUS INVESTMENT 14.84   8.8 1.69 1.56 10.53
TCP CAPITAL 13.75   29.3 0.47 1.44 10.48
OAKTREE SPECIALTY LENDING 4.90   0.0 -1.39 0.50 10.02
PENNANTPARK FLOATING RATE CAPITAL 11.68   30.0 0.39 1.14 9.81
HERCULES TECH GROWTH CAP 13.26   10.0 1.32 1.28 9.55
GOLDMAN SACHS BDC 20.29   22.5 0.90 1.80 8.88
GLADSTONE CAPITAL 9.50   63.3 0.15 0.84 8.84
ARES CAPITAL 19.19   10.5 1.82 1.60 8.39
SOLAR SENIOR CAPITAL 17.32   18.8 0.92 1.41 8.17
GOLUB CAPITAL BDC 18.55   15.7 1.18 1.28 6.89
GLADSTONE INVESTMENT 12.34   7.4 1.67 0.82 6.73
MEDLEY CAPITAL 2.61   0.0 -1.62 0.15 5.81
MAIN STREET CAPITAL 43.18   16.8 2.57 2.46 5.69

MONROE CAPITAL - MRCC
MONROE CAPITAL - MRCC  


Older articles featuring Monroe Capital (MRCC):
TCG: Why I Bought Carlyle Group's BDC Currently Yielding 21%
BDCs Continue To Affirm Dividends: Capital Southwest At 15%
Picking Winners And Losers In The 18% Yielding BDC Sector
High Yield: Owning BDCs During The Crisis
Quick BDC Market Update: 18% Average Yield But Continued Volatility
147 Broker Favored Financial Service Equities With Yields Priced Right
These Dividend Stocks Are The New 'Bonds' For Retirement Portfolios
The Big Boys Continue To Pile Into This Dividend Sector: Owl Rock Capital
Juul Investor BlackRock TCP Capital Currently Yielding 10.3%
Tax-Free Portfolio Yielding 10%

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