FSC: It's now my number #1 Business Development Company in terms of dollars I have invested in bdc's (My top five being FSC, PNNT, and to a much lesser extent - TICC, TCAP, NGPC).
I still don't understand or feel comfortable with the accounting of these bdc's, even though I've held various bdc's for several years.
With FSC I have a net loss position (the stock dropping below my purchase prices giving me paper losses that have outweighed the total of all distributions ("dividends") that I've received.
I added a few shares of FSC to my position on Friday, and am considering adding a little more.
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Jim Cramer has apparently recently suggested that a viewer "avoid" the stock, and it may not look so great using somebody's or some company's proprietary valuation metric:
seekingalpha.com
Here are some aspects that attract me to the stock:
Stock at $9.51 -- which is my latest buy price -- is near a 12-mo low. 52-Week Low was Jul 29 @$9.00
Upcoming monthly ex-div date is Aug 30. (.107/sh). Looks like the distributions were cut in '08. In '09 they were (per Yahoo) $1.07, in '10 $1.04, and this year the annualized amount is $1.28. $1.28 -- if it holds up. That is a scary-high yield: $1.28/$9.51 gives almost 13.5%.
I can buy the stock now for less than what some insiders have recently paid: In May and June there were several significant (significant in my view) buys in $11-$12 area by couple of insiders, i.e. Mr Tannenbaum the ceo/cob:
finance.yahoo.com
David Einhorn and Ruane-Cunniff are "gurus" who, if they haven't sold, may still be in this stock.
Here are some snippets from management's discussion on Thursday of the most recent quarter's results:
"...We are well position to realize an immediate earnings benefit when interest rates eventually begin to rise."
"We remain focused on the potential for inflation to increase given the continued pro-liquidity stance of the Federal Reserve, and what we perceive as an inflation being exported from China. As of June 30, 2011 the current percentage of our debt portfolio with floating rates was approximately 65%."
They may have 2 of 60 loans that are in trouble??:
"At June 30, 2011 our portfolio consisted of investments of 60 companies. At fair value, 98.1% of our portfolio consisted of debt investments and 82.6% of the portfolio were first lien loans. As of June 30, 2011, we have stopped accruing cash interest, PIK interest and OID on two investments, which are not paid all their scheduled cash interest payments."
They reported net asset value of $10.72 (above the current stock price of $9.51): "We are one of the few BDCs that did not ask for permission to sell stock below book value this year. In our view, raising money below book value is rarely in the best interest of shareholders." So I am hoping they won't be needing to raise additional cash by issuing more shares - at least while the stock remains below nav of $10.72.
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