2 Solid BDCs to Buy Today

Posted by D4L | Monday, June 30, 2014 | | 0 comments »

Just like any other sector of the stock market, there will be winners and losers. Success in these companies rests purely on the talent of its management team. The pressure to invest fresh funds is great, and the long-term winners in this sector have deft and opportunistic management teams that are aggressively putting new capital to work. That’s what’s allowing these select companies to thrive despite extraneous events like certain indexes and exchange-traded funds (ETFs) letting BDCs go, which was mainly to drive down their expense ratios. (I find the marketability of these products to be a lousy excuse to come out of a stock that pays as much as 9% or 10%, when they’re growing the top and bottom lines sequentially quarter to quarter.)

So as long as the bullish trend for the broader market stays intact and bond yields keep rising along the way as a byproduct of an improving economy and Fed tapering, then I would expect shares of the following two companies to continue ticking higher in the second half of 2014. In its May earnings report, Apollo Investment (AINV) scored a win for shareholders, announcing first-quarter net investment income of 22 cents per share that topped estimates by a penny while earning an upgrade to “outperform” from JMP Securities. So if a BDC can generate a 7.7% current yield from a portfolio of floating-rate loans while paying a monthly dividend, I’m very interested in getting involved while short-term rates are still artificially down near zero. PennantPark Floating Rate Capital (PFLT) is just such a BDC that fits right in with this thesis.

Source: InvestorPlace

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