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Strategies & Market Trends : Value Investing

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To: Sergio H who wrote (47940)	5/14/2012 5:17:41 PM
From: MCsweet	2 Recommendations Read Replies (1) of 78671

Sergio H, I don't disagree with what you just said in your reply, but I don't see how you are disproving my claim that BDCs are not good to own in a credit crsis. In a credit crisis, basically all BDC stock prices will get hit. I can almost guarantee it. BDCs are extremely credit sensitive -- they are making loans to small companies at very high interest rates, and the market reflects that accordingly. I didn't say they wouldn't weather the storm or that you can't earn attractive returns over time despite a crisis, but why own them before they go into freefall? If you think a credit crisis is afoot, it is not time to be plowing money into BDCs. That much is obvious to me. They are probably good buys after a credit crisis hits, but I do not want to own them if I expect a crisis is coming. And I don't see how ARCC is an example of one gone wrong, it is probably one of the best run BDCs. Right now, BDCs offer attractive returns in my view, but I wouldn't be loading up because I think there is a non-zero chance of a credit crisis. MC

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