For some PSEC background, you may want to peruse two write-ups on ValueInvestorsClub.com via guest access:
valueinvestorsclub.com
The CEO, John Barry, is binary - people either love him or hate him, with the latter group being more popular. Last fall, PSEC raised a ruckus when they sent out a proxy that would allow them to sell shares below NAV. Many investors were upset that management would let them be diluted. They could not get the vote and dropped the issue, and then subsequently did a follow-on equity offering.
General rules about investing in BDC's:
1. Never buy the IPO.
2. Buy immature BDC's when they trade below NAV.
3. On mature BDC's, buy when the yield is over 10% (although make sure they are earning the dividend; MCGC used to do a return of capital).
4. On a mature BDC, sell when the yield is under 8%. However, there is such a chase for yield that it is distorting things and some are trading in the 7's.
On difference between mature vs. immature, most BDC's take time to invest the capital and use leverage. BDC's are limited to assets to equity ratio of 200%, meaning that debt to equity can't exceed 1-1. Most operate BDC's will operate between 65% and 95% of leverage. |
