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Strategies & Market Trends : Dividend investing for retirement -- Ignore unavailable to you. Want to Upgrade?

To: inspbudget who wrote (24108)	12/26/2015 2:26:31 PM
From: E_K_S	Read Replies (1) \| Respond to of 34328

Re:PSEC Here is what their portfolio was/is from their Web site (as of May 6, 2015). It is comprised of three types of assets: (1) secured debt, (2) unsecured debt and (3) equity. The big problem is how these assets are priced especially there is little to no market (ie ill-liquid), equities are not traded but in most cases are private equity so limited no buyers, and both types of debt (secured and un-secured) would have to be significantly discounted to liquidate. ---------------------------------------------------------------------------------- If I were a buyer of any BDC, I would own a basket of these companies and/or an ETF. I would be careful making any investment in a deflationary market environment and would not base the value on the company's NAV calculation just because in a fire sale environment, one might be lucky to get $0.50 on the dollar. The positive is most of these assets are U.S. companies (very little foreign country and/or currency risk). I would think that if any sale and/or liquidation was necessary it would be done to(1) large corporate owners of similar businesses, (2) other private equity BDC companies and/or (3) Warren Buffet value investors operators and/or turn around Private Equity. The BDC business is a 'niche' business and everything is about management, their long term experience, and their contacts in the industry buying/selling distressed assets. EKS

To: inspbudget who wrote (24108)	12/26/2015 8:23:26 PM
From: Elroy	Respond to of 34328

Might be worth the time and trouble to investigate how much of their portfolio is comprised of " Level 3 " assets - these assets are valued by PSEC, and ( as far as I know ), not marked to market. It is possible that such assets could be on PSEC's books at highly inflated valuations, representing a risk that may be overlooked by investors. PSEC's answer to the NAV question is that an outside firm does the valuation marks. Maybe the outside firm inflates the values to keep PSEC's business, but probably not. I'm not a "conspiracy theorist" type. If I ran a BDC and wanted to get fair value marks, I would hire an outside firm to provide them. So PSEC's answer to the fair marks sounds about as good an answer to this question as a BDC can provide. And lets say the outside firm is providing inflated marks, and the liquidation value of PSEC's assets is $4.00 per share, not $10.17 per share. The portfolio is still earning $1.00 per year and PSEC is distributing $1.00 per year per share, and defaults are minimal. As long as defaults remain minimal, the NAV doesn't matter than much, the income will continue. As long as the income continues we don't really care if the NAV is $2.00 per share or $22.00 per share. My inclination on this topic is to take PSEC's reported NAV ($10.17 last Q) as the most likely correct NAV value, but who knows? PSEC has also had some run-ins with SEC reporting Come on, and SEC investigation which determined that PSEC is doing the right thing is a reason to NOT invest? For me that's typical of the meaningless noise that the anti-PSEC people post. Where's the beef? You don't want to invest in PSEC if 1- They are going to cut the dividend going forward (the portfolio income is expected to decline), or 2- Defaults are going to increase (the reported NAV number is going to permanently decline) Almost everything else is meaningless noise, in my opinion.